Toshiba's ongoing share sales have unexpectedly reshaped the ownership of Kioxia, the leading Japanese NAND flash maker.

According to a report from Nikkei on the 10th, SK hynix has increased its indirect stake in Kioxia to 14.19% through a special purpose vehicle, surpassing Toshiba's 14.06% to become the largest shareholder.

However, becoming the top shareholder does not mean SK hynix has secured management control over Kioxia. Since the shares are currently held in the form of convertible bonds (CBs), SK hynix does not yet have direct voting rights. Whether it can convert these bonds and further expand its influence will depend on factors such as regulatory approvals.

Seven Toshiba Disposals Lead to a New Top Shareholder

The report indicates that Toshiba previously held 15.10% of Kioxia's shares. After seven consecutive sales from July 15 to August 3, its stake has been reduced to 14.06%.

During this period, the special purpose entity "BCPE Pangea Cayman2" (SPC2), used by SK hynix for its investment in Kioxia, has accumulated a 14.19% stake, thereby surpassing Toshiba to become the largest shareholder.

SPC2 is one of two special purpose vehicles SK hynix established in 2018 to invest in Kioxia. At that time, SK hynix invested approximately 1.3 trillion won through SPC2 in the form of CBs. The other investment vehicle, SPC1, completed its share sale in June following Bain Capital's exit, leaving SPC2 as the sole channel for SK hynix's stake in Kioxia.

Convertible Bond Conversion is Key to Gaining Influence

Currently, SK hynix's interest in Kioxia is primarily a financial investment, as it has not yet acquired the voting rights associated with common shares through CB conversion.

If the conversion is completed in the future, SK hynix will obtain direct voting rights, potentially enhancing its influence over Kioxia's business decisions. However, this process is not without obstacles.

As the world's second-largest NAND manufacturer, SK hynix's equity relationship with Kioxia, the third-largest global NAND producer, may face scrutiny under major market competition laws and antitrust regulations. Additionally, as a significant semiconductor company in Japan, changes in Kioxia's ownership structure also involve Japanese policy considerations regarding its critical semiconductor supply chain.

New Dynamics in the NAND Competitive Landscape

Kioxia is Japan's largest NAND manufacturer and ranks third globally in the NAND market, behind Samsung Electronics and SK hynix. While this change in ownership structure is unlikely to alter the industry's competitive dynamics in the short term, it has increased the strategic focus on the equity relationship between SK hynix and Kioxia.

SK hynix invested a total of approximately 4 trillion won in Kioxia through two special purpose vehicles in 2018. With the exit of SPC1 and SPC2 becoming the sole holding channel, along with its unexpected rise to become the largest shareholder, the strategic significance of this investment has once again drawn market attention.

The future decisions on whether to convert the CBs, whether SK hynix can secure voting rights, and the stance of Japanese and other regulatory bodies will determine whether this equity relationship can evolve from a financial investment into deeper industrial collaboration.