00:00Now elsewhere, SK Hynix planning to raise up to $29.4 billion tapping investor demand
00:06for memory chip stocks. You can get the flavor of today's deals, a lot of AI.
00:10The landmark U.S. listing could rank among the top five largest share sales ever.
00:17Jake Silverman, Bloomberg Intelligence, joins us now for more.
00:20Jake, it's a big deal. Why do it?
00:22Yeah, I think for Hynix, really the goal here is to sort of narrow the valuation gap with
00:28Micron because they've historically, not just them, but Samsung as well, have historically
00:33had a gap in valuations compared to their U.S. peers like Micron. So this is an opportunity,
00:38I think, for investors to no longer see SK Hynix as at a discount to Micron, but maybe trade around
00:44something of a more similar multiple than they have in the past.
00:48How should investors be thinking about those multiples? I know you're expecting some big
00:52numbers when it comes to Micron's earnings later this evening. It's this whole debate of are these
00:57still cyclical companies? Are they not? How are you currently thinking about that?
01:01Yeah, it's interesting because I think one of the conversations I have most with investors is
01:05what is the actual right multiple to pay for these companies? Typically at cyclical peaks,
01:09you start to see the multiples actually contract quite a bit down to like low, mid, single digits.
01:15And right now, I mean, if you look at the forward earnings, it's closer to around 10X or so.
01:19So the question is really, is that the right multiple? Is that the multiple that investors
01:23actually want to pay for it? And do we see potentially more upward earnings revisions
01:27where that multiple maybe is actually closer to mid single digits or so? And then, you know,
01:32how much longer does the cycle have to run, as you pointed out? Could we see the cycle run through
01:3727
01:37into 28? It kind of depends very heavily on AI CapEx and also capacity expansion from the different
01:43players themselves. Well, to that point, and this is kind of what Ryan and I were talking about with
01:47the earlier deal of how important it is to be able to get a cheaper cost of capital, to have
01:52access to
01:52capital itself. What does it mean for an SK Hynix to just bring in more money from a U.S.
01:57listing?
01:58I think the real benefit to SK Hynix is that it kind of reduces some of the capital outlays that
02:05they're planning in the future. But I don't think that they're really struggling for cash. I mean, if you
02:09look at the free cash flow they've generated just over the last few quarters, and if you assume that the
02:14memory cycle is going to continue at least through this year and into next year as well, I don't
02:18think they're going to be struggling for cash. So I think really the idea of bringing in some
02:22additional capital is when they do plan to expand capacity, you know, maybe in the next down cycle,
02:27do they burn cash again? It's possible, right? Because that's what we've seen in the past.
02:31So, you know, if they bring in, I think it was around 29 point something billion, you know,
02:36it basically just, they can expand the capacity by that amount and no longer have to worry about that.
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