Bain Capital cashed out about 2.5 trillion yen to exit Kioxia, while SK Hynix quietly rose to become the second largest shareholder.

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Bain Capital completed a large-scale divestment of Kioxia, setting a record for the highest investment return by a fund in Japanese history. This exit simultaneously reshaped the equity structure of the Japanese NAND flash memory giant—Toshiba regained its position as the largest shareholder, while SK Hynix quietly became the actual second-largest shareholder via convertible bonds.

According to Nikkei News on July 26, Bain Capital has liquidated all holdings from three of its four special purpose companies (SPCs) in Kioxia within about a year, cashing out about 2.5 trillion yen. Meritz Securities of Korea estimates that with Bain’s divestment completed, SK Hynix’s shareholding participation in SPC1 has also been disposed of. SK Hynix is expected to recognize about 40 trillion won of cumulative investment gains in the second quarter of 2026, pushing its pre-tax profit close to 100 trillion won for that quarter.

Meanwhile, SK Hynix theoretically can convert its SPC2 convertible bonds into about 14% of Kioxia's equity. However, this conversion requires approval from multiple countries’ antitrust reviews, and both Kioxia and the Japanese government are cautious about competitors acquiring voting rights, making the final conversion quite uncertain.

Bain’s Record Exit; Toshiba Returns to No. 1

Bain Capital, together with Toshiba, Apple, Dell, and SK Hynix, acquired Toshiba Memory (now Kioxia) in 2018. With a total cash-out scale of about 2.5 trillion yen, it completed the exit, considered the largest single investment return ever for a fund in Japan.

Kioxia was listed in December 2024. At the time of listing, Bain Capital's four SPCs collectively held about 55% of shares, making it the largest shareholder; Toshiba was second with about 40%; Japanese optical company Hoya held about 3%.

With Kioxia’s stock price rising steadily since last summer, both Bain and Toshiba actively reduced their holdings. Bain liquidated all shares from three SPCs, including portions from Apple, Dell, and SK Hynix's participation via SPC (about 26.6 billion yen investment), cashing out about 2.5 trillion yen. Toshiba lowered its shareholding from around 40% to 15%; by last March, it had gained about 800 billion yen from share sales, more than twice its initial investment.

After divestment finished, Toshiba regained the top shareholder spot with a 15% stake.

SK Hynix’s Position: Actual Second, Voting Rights Uncertain

After Bain liquidated three SPCs, one SPC still holds about 14% of Kioxia shares, ranking as the second-largest shareholder. Meritz Securities estimates that SK Hynix holds convertible bonds (CB) with attached warrants of this SPC (SPC2), and if conversion is completed, it could theoretically obtain about 14% equity in Kioxia.

SK Hynix’s initial investment in 2018 totaled about 395 billion yen, including around 26.6 billion yen invested in SPC1 for share sale purposes, and about 129 billion yen in SPC2 targeting business management rights. Rough calculations suggest SK Hynix has gained about 750 billion yen (about 7 trillion won) in cash-out returns from SPC1 share sales.

Currently, SK Hynix does not hold any effective voting rights in Kioxia. If CB conversion is completed and after Toshiba’s final exit, SK Hynix could become the largest shareholder—but according to existing commitment, SK Hynix cannot hold more than 15% of Kioxia’s total voting rights before 2028.

Conversion Road: Dual Obstacles of Regulation & Competition

CB conversion faces significant challenges. Kioxia and SK Hynix directly compete in the NAND flash memory market, and SK Hynix currently holds about 20% of the global NAND market share. In a June report this year, Kioxia explicitly noted, "Due to competitive relationship, SK Hynix exercising voting rights may have interests diverging from those of ordinary shareholders."

The Japanese government is also highly sensitive to the transfer of control over its key semiconductor companies overseas. There are voices within SK Group expressing concerns that "in practical operation, conversion of bonds may be quite difficult."

However, there are signs that the conversion process may have begun. Kioxia’s recent report stated, "Although SK Hynix has not yet completed bond-to-share conversion, it may have started necessary procedures in several countries under antitrust laws, foreign exchange laws, and foreign trade laws."

Meritz Securities anticipates that SK Hynix will recognize the final proceeds from SPC1 disposal in the second quarter of 2026. Together with SPC2 valuation gains and other investment-related income, non-operating income for the quarter is expected to exceed 41.6 trillion won, pushing pre-tax profit to about 100 trillion won.

Meritz also pointed out that SK Group chairman Chey Tae-won’s divorce lawsuit has greatly increased the group’s need to raise dividends from its biggest cash source, SK Hynix. Related proceeds will likely be distributed upstream via SK Square, with a high possibility of a large increase in subsequent dividends.

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