Storage manufacturer SK hynix raided by South Korean regulators — investigation into supplier FADU intensifies

On April 30, 2024, South Korean officials from the country’s financial watchdog group raided the SK hynix headquarters in Incheon. The move was part of an ongoing investigation into the alleged bloated IPO of fabless SSD and controller company Fadu. SK hynix is one of Fadu’s major clients.

Officials from South Korea’s Financial Supervisory Service (FSS) searched SK hynix’s office and accounting department. They secured data related to the company’s business with Fadu, and detained unnamed employees for questioning. SK hynix confirmed the relevant employees were being detained as witnesses and were actively cooperating with the investigation.

Before its IPO in August 2023, Fadu told investors its estimated annual revenue for 2023 would total 120 billion won ($86.5 million). The company then debuted on South Korea’s Kosdaq stock market with a selling price of 31,000 won ($22.70) per share, and a market capitalization of approximately 1.5 trillion won ($1.1 billion).

Fadu failed to achieve those expectations, and its stock price more than halved in the months following the IPO. Investors and regulators alike have called into question some of Fadu’s corporate listings for failing to disclose information that might have influenced its stock prices.

Shareholders responded by suing Fadu , underwriters NH Investment and Securities, and Korea Investment and Securities. This prompted South Korea’s FSS to intervene, and search Fadu’s Korean offices as well as those of NH Investment, Korea Investment, and the Kosdaq exchange itself in March.

The agency’s special judicial police next raided SK hynix's headquarters. Reportedly, the FSS intends to compare SK hynix’s financial records with those Fadu maintained.

For its part, SK hynix has positioned itself as one of the largest memory chipmakers in the world. Its high-bandwidth memory modules used in AI chipsets were already sold out for 2024, and close to being sold out for 2025. What impact, if any, the regulatory raid might have remains to be seen.