SK Hynix ADRs on the Nasdaq currently trade at a premium of up to 25% over South Korean common shares. Initial restrictions on converting Korean shares into U.S. equivalents caused this persistent price discrepancy.
Two-way convertibility between the ADRs and Korean-listed stock begins on July 29. Analysts expect traders to buy cheaper Korean shares and convert them into higher-priced ADRs for profit.
This arbitrage activity will likely close the price gap. The shift is expected to put significant downward pressure on U.S.-listed ADR prices.