The $SK hynix(SKHY)$ ADR trades at a significant premium to its Korean shares, but any form of arbitrage will be blocked and the premium will essentially be permanently preserved. Conversion of Korean shares into ADRs is capped at 2.5% of outstanding shares—and Bloomberg reports that this limit has already been fully used.

Market Chatter: SK Hynix Caps ADR Conversions at 2.5% of Outstanding Shares

SK Hynix's US-listed American depositary receipts can only represent up to 2.5% of its outstanding shares, with the quota already fully utilized following its $26.5 billion ADR offering, Bloomberg reported Thursday, citing Korea Securities Depository Chief Executive Rhee Yunsu.The report said investors cannot convert Seoul-listed shares into ADRs unless existing ADR holders first convert their US-listed receipts back into Korean shares, limiting arbitrage between the two markets.SK Hynix's ADRs have traded at premiums of as much as 51% to the Seoul-listed stock and were about 33% higher as of Wednesday, according to the report.The company did not immediately respond to MT Newswires' request for comment.
Market Chatter: SK Hynix Caps ADR Conversions at 2.5% of Outstanding Shares

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