When the same company's stock trades at two different prices in two countries, measuring the gap takes only three steps: undo the conversion ratio, apply the exchange rate, then divide by the domestic share price. One SK hynix ADR corresponds to 0.1 of an ordinary share, so ADR price × 10 × KRW/USD gives the ordinary-share equivalent (Economist Korea).
Plugging in the July 14 close makes it concrete. The ADR at $193.92 works out to 2,887,000 won, while the Seoul-listed share closed at 1,913,000 won — a premium of 50.9% (Businesskorea). Solve backwards and the implied rate is about 1,489 won per dollar. In other words, a "price gap" figure carries that day's currency rate inside it, not just the stock price.
Two places the calculation goes wrong
The first is the ratio. Depositary receipts are structured differently for each issuer. SK hynix uses one ADR to 0.1 ordinary share, so you multiply by ten — apply the same step to a 1:1 issue and you are off by a factor of ten. Converting the Nasdaq quote straight into won and comparing it with the Seoul price is the most common misreading.
The second is the exchange rate. Hold both prices fixed, move only the rate, and the premium shifts as follows. The table below fixes the July 14 figures — an ADR at $193.92 and an ordinary share at 1,913,000 won — and varies the applied rate.
| Applied rate (KRW/USD) | Ordinary-share equivalent (KRW) | Premium (%) |
|---|---|---|
| 1,400 | 2,714,880 | +41.9 |
| 1,450 | 2,811,840 | +47.0 |
| 1,489 (implied) | 2,887,469 | +50.9 |
| 1,550 | 3,005,760 | +57.1 |
Fifty won of currency movement is worth roughly five percentage points of premium. That is why a headline premium recalculated on a different day's rate no longer matches.
Why the gap reached 51% — conversion opened only one way
The premium was about 3% at pricing. Four days later it was 51%. For other Korean issuers such as Samsung Electronics, Kakao and KT, DR premiums typically sit below 2%, and Taiwan's TSMC ranged from 0–20% in 2019–2021 and 10–30% in 2022 (Joseilbo). Fifty-one percent is not an ordinary number in this market.
What closes such a gap is conversion, not opinion. Someone has to sell the expensive side, buy the cheap side and swap the certificates. Right after listing that pipe was shut. Korea Securities Depository set July 29 as the date mutual conversion requests take effect, and on its earnings call the company said ADRs could be converted into ordinary shares from July 30, with the conversion cap set at 17.79 million ordinary shares (Money Today). Because of procedure and that cap, actual settlement was expected to take several weeks.
The plumbing is also asymmetric. ADRs can be turned into Korean shares, but turning Korean shares back into ADRs remains difficult under current rules, as The Wall Street Journal noted (Seoul Economic Daily). Selling pressure from the premium could not be delivered into the U.S. side, so buying piled up in the ADR price alone. Roughly 150,000 option contracts traded on the first day of ADR options, adding derivative demand on top.
What re-links two markets is not a forecast — it is the conversion plumbing.
What ADR price would mean zero premium?
Run the same formula in reverse and the baseline appears. Holding the share at 1,913,000 won and the rate at 1,489, a zero premium corresponds to 1,913,000 ÷ (10 × 1,489) ≈ $128.48. By target premium:
| Target premium (%) | Implied ADR price (USD) | Ordinary-share equivalent (KRW) |
|---|---|---|
| 0 | 128.48 | 1,913,000 |
| +10 | 141.33 | 2,104,300 |
| +15 | 147.75 | 2,199,950 |
| +30 | 167.03 | 2,486,900 |
| +50.9 (July 14 actual) | 193.92 | 2,887,469 |
Market watchers quoted by Businesskorea expect the gap to compress toward 10–15% once conversion restrictions lift; on this table that is the $141–148 band, assuming the share price and the currency stay put. Both assumptions are load-bearing. If the Seoul price rises, the baseline rises with it, so a narrowing premium does not automatically mean a falling ADR.
What to watch
- How fast conversion requests actually reach settlement — whether the "several weeks" guidance holds
- How much of the 17.79 million-share conversion cap gets used; once it is full, the narrowing force stops
- Any change in the rules blocking conversion of Korean shares back into ADRs
- The won-dollar rate, worth several percentage points of premium on its own
- Open interest and volume in ADR options, the part of the premium supported by derivative demand
The conditions that would break this framing are equally clear. Expand the cap early, or allow reverse conversion, and convergence arrives faster; keep U.S. demand above the cap and a double-digit gap survives the opening of conversion. A price gap does not tell you which market is right — it measures how open the pipe between them is.
Sources
- SK hynix ADR premium tops 51% three days after Nasdaq listing (Businesskorea)
- SK hynix ADR premium over ordinary shares passes 51% (Economist Korea)
- From 3% to 51% in four days: the SK hynix ADR premium (Joseilbo)
- SK hynix: ADRs convertible into ordinary shares from July 30 (Money Today)
- WSJ flags SK hynix ADR premium as a sign of overheated AI trading (Seoul Economic Daily)