When SK Hynix listed its ADRs on Nasdaq in July 2026, Korean financial outlets reported in late July 2026 that the US line was trading above the Seoul share once you adjusted for the ratio and the exchange rate. That shouldn’t last in a market with arbitrageurs. It can in this one, and a large part of the reason is a Korean rule written into the company’s own filings: turning Korean shares into new ADRs can need the company’s consent, and the room to do it can run out.
This explainer covers how that cap works, why it can let a gap in one direction last longer than a gap in the other, and what it means if you’re paying the US price. Our guide to how Korean ADRs work covers the wider mechanics, and our list of Korean ADRs shows which companies have them.
Key Takeaways
- The fair-value math is simple. For SK hynix, one ADR is one-tenth of a share, so its value on paper is the Seoul price divided by ten, converted into dollars.
- Arbitrage runs one way freely. If the ADR is cheaper, you can generally buy it, surrender it for shares, and sell it in Seoul. If it’s dearer, you need new ADRs, and those can need the company’s consent.
- SK Hynix’s reported cap equals its offering. The company issued 17,790,000 new shares to Citibank for the July 2026 offering, and Korean outlets reported a conversion cap of the same 17.79 million shares.
- A premium you pay can shrink. If you buy the ADR above its Seoul value, you can lose money even if the Seoul share doesn’t move.
Contents
- The arithmetic first
- The two directions aren’t equal
- How SK Hynix’s cap is built
- What it costs to make the trip
- Foreign ownership limits: another way a gap opens
- What this means if you’re buying the ADR
- Frequently asked questions
1. The arithmetic first
Before you can call anything a premium, you need the number the ADR should trade at. For SK Hynix, each ADR represents one-tenth of one common share, according to its July 9, 2026, prospectus. So:
| Input | What to use |
|---|---|
| Seoul share price | The KRX KOSPI price, in won |
| Ratio | One ADR = one-tenth of a share (SK Hynix) |
| Exchange rate | Won per US dollar at the same moment |
| Fair value of one ADR | Seoul price × 1/10 ÷ won per dollar |
If the Nasdaq price sits above that figure, the ADR trades at a premium. Below it, a discount. The ratio changes by company: KEPCO’s ADR is one-half of a share, so the same formula uses 1/2.
One practical caution: the exchange rate moves too. SK Hynix’s prospectus warns that one-dollar swings can hurt the dollar value of both the shares and the ADRs.
2. The two directions aren’t equal.
SK Hynix’s prospectus names the trade that should close any gap. Investors could buy or sell its shares or ADRs “to take advantage of any price differences between the markets,” a practice it calls arbitrage, and it warns that this could create unexpected volatility in both markets.
Here’s how each side of that trade works in Korea.
When the ADR is cheaper than its Seoul value. You buy ADRs, surrender them to the depositary for the underlying shares, and sell the shares in Seoul. The prospectus gives ADR holders the right to withdraw at any time, apart from temporary delays, unpaid fees and taxes, and legal restrictions. SK Hynix said on its July 29, 2026, earnings call that this conversion would open on July 30, the day after the related shares finished listing in Seoul, according to Aju Business Daily and Newspim.
When the ADR is dearer. You’d buy shares in Seoul, deposit them with the depositary for new ADRs, and sell those in New York. This is the side Korea restricts. The prospectus says that under a presidential decree issued under Korea’s Capital Markets Act and the Financial Services Commission’s rules, the depositary needs SK Hynix’s prior consent for any deposit of issued shares that exceeds the number the company initially deposited for the program. And it adds: “It is possible that we may not give such consent.”
On the same call, the company said converting shares into ADRs may require the issuer to complete a regulatory filing that would usually take several weeks or more, according to the same reports.
So one side of the arbitrage is a request to the depositary and a fee. The other can be a consent request, a filing, and a wait. A discount can be traded away. A premium is harder to close.
3. How SK Hynix’s cap is built
The cap, as SK Hynix described it, follows from the offering itself.
SK Hynix’s 6-K filed on July 15, 2026, reports that it issued 17,790,000 new common shares to Citibank, the depositary, through a third-party allotment that closed on July 14, 2026. Those shares back the ADRs. At ten ADRs per share, they match the 177,900,000 ADRs sold in the offering at $149 each.
On the July 29 call, the company put its conversion cap at 17.79 million shares, counted in common shares rather than ADRs, and said the total ADRs outstanding can’t exceed it, according to Korean press reports. It also said no specific decision had been made on expanding the ADR share further. That was the position as of the call. A later change would come from the company.
KEPCO’s annual report describes the same Korean rule as a formula: consent is needed for any deposit larger than the gap between the shares the company has deposited for ADRs and the shares on deposit at the time. Read SK Hynix’s numbers through that formula, and the result is stark. Right after the offering, every share it deposited was still on deposit, so there was no free room at all. Under that formula, room appears only when holders surrender ADRs and take shares out, and it’s the size of what they took out.
That’s likely a large part of the mechanism behind the headlines. The premium isn’t necessarily evidence that arbitrageurs fell asleep. It is what you would expect when the main arbitrage route for closing a premium runs through a door the company controls.
4. What it costs to make the trip
Even where conversion is open, it is not free.
- Depositary fees. SK Hynix’s agreement allows up to $5.00 per 100 ADSs for issuing ADSs and the same for cancelling them, and its fee schedule notes that some charges may be cumulative.
- Time. The share-to-ADR leg may need a regulatory filing that the company expected to take several weeks or more, as reported by Korean outlets. A premium can move a long way in that time.
- Currency. The trade mixes won and dollars, and the prospectus flags exchange-rate risk on both instruments.
- Korean taxes. Selling shares on the KRX KOSPI market generally carries a 0.20% securities transaction tax, including the agricultural and fishery special surtax. And SK hynix’s prospectus says that if you convert shares into ADRs and then sell those ADRs, you aren’t exempt from Korean income tax, an exemption a non-resident’s ADR sales outside Korea otherwise generally get, provided the ADRs are deemed to have been issued overseas.
- The one-way door. SK Hynix warns that if you surrender ADRs for shares, “you may not be allowed to deposit the common shares again to obtain ADSs.”
Some of these are small on their own. Together, they mean a small premium may not be worth chasing even when the path is open.
5. Foreign ownership limits: another way a gap opens
For SK hynix, a large part of the gap traces to a deposit cap. A few Korean ADRs carry a second constraint: a ceiling on foreign ownership of the company itself.
KEPCO’s annual report gives a 40.0% ceiling on foreign ownership. KT’s annual report says foreigners may not own more than 49.0% of its voting shares, as a network service provider. KEPCO’s filing lists shares acquired by a depositary to issue ADRs among the cases where its ceiling may be exceeded.
KT adds a wrinkle on deposits. Its April 2026 annual report says its depositary bank plans, at a time it considers appropriate, to start accepting share deposits without KT’s consent up to the amount Korean rules allow. As of that filing, the bank was still asking for consent, and KT said it may not provide it.
For these names, a gap between New York and Seoul can reflect how much foreign room is left, not only a deposit cap. Our explainer on Korea’s foreign ownership ceilings covers how those limits work on the exchange.
6. What this means if you’re buying the ADR
If you buy a Korean ADR at a premium, you’re holding two positions at once: the company and the premium itself.
The company part moves with the Seoul price and the exchange rate. The premium part moves with supply and demand in the US line, and it can shrink if more ADRs become available or demand cools. If it does, you can lose money even when the Seoul share is flat. SK hynix’s prospectus names the Korea Exchange as its principal trading market, so the Seoul price is the anchor the ADR circles around.
That does not make the ADR a bad buy. Convenience is worth something: one account and one currency. But it’s worth knowing what you’re paying for it. Run the fair-value math in section 1 before you buy, and decide whether the premium on the day is a price you’d pay for that convenience. If it isn’t, the routes compared in our guide to investing in Korean stocks from abroad may cost less. That’s a judgment about your own situation, not a recommendation.
7. Frequently asked questions
Why is the SK Hynix ADR more expensive than the Korean share?
When it trades above its Seoul value, part of the reason is structural: closing that gap needs new ADRs, and creating them from Korean shares can need SK Hynix’s consent once the room in the program is used. Demand for the US line matters too. Korean outlets reported the ADR above its Seoul value in late July 2026. Check the math yourself on the day you trade, because the gap moves.
Can I convert SK Hynix shares into ADRs?
It depends on the room in the program and, beyond the amount SK Hynix initially deposited, on the company’s consent. SK Hynix said on its July 29, 2026, call, as reported by Korean outlets, that the cap was 17.79 million common shares and the process could take several weeks or more.
Can I convert SK hynix ADRs into Korean shares?
Generally, yes. The company said this would open on July 30, 2026, as reported by Korean outlets. Fees apply, and SK hynix warns you may not be able to deposit the shares again afterward.
Is the cap 17.79 million ADRs?
No. SK hynix put it at 17.79 million common shares, according to Korean press reports of its July 29, 2026 call. At ten ADRs per share, that’s 177.9 million ADRs, the size of the July 2026 offering.
Does the same thing happen with other Korean ADRs?
The consent rule appears in KEPCO’s and KT’s filings too. KEPCO has a 40.0% ceiling on foreign ownership, and KT a 49.0% ceiling on its voting shares, which can affect how their US and Seoul prices relate.
Disclaimer: This article is for general informational purposes only and does not constitute investment, legal or tax advice. Facts come from SK hynix’s prospectus dated July 9, 2026 and its Form 6-K of July 15, 2026, from KEPCO’s and KT’s annual reports filed in April 2026, and from Korean press reports of SK hynix’s July 29, 2026 earnings call. Conversion caps and consent policies can change, and prices move. Check the latest filings and current prices before you act, and consult a qualified professional about your own position.
Last updated: November 4, 2026
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