Four "bombs" are being set for Kioxia (285A) at the same time.
First is the monstrous financial results.
Second is the 800 billion yen share buyback that was exhausted in just one week.
Third is the resumption of merger negotiations with Western Digital.
Fourth is the nine leveraged ETFs currently being prepared in the United States.
Any one of these would be huge news. All four are running simultaneously.
And among these four, which one "explodes" first will determine the direction of Kioxia's stock price.
Let's look at them one by one.
Bomb ①: Operating Profit of 1.27 Trillion Yen in 3 Months
Q1 results announced on July 31st:
- Sales: 1.7671 trillion yen (+415.5% YoY)
- Operating Profit: 1.27 trillion yen (28 times the 44.9 billion yen from the previous year)
- Operating Margin: 71.9%
- First-half Outlook: Net profit to be 36 times the previous year, reaching record highs.
Operating profit of 1.27 trillion yen in three months. An operating margin of 71.9%.
No other listed company in Japan can produce such numbers. They are beyond reproach.
However, the stock price is hovering in the 49,000 yen range, a 56% drop from its high of 112,700 yen.
The stock price is less than half, even in the midst of record-high profits.
You can understand why this is happening by looking at the remaining three bombs.
Bomb ②: 800 Billion Yen Buyback Exhausted in One Week
Announced alongside the earnings was a share buyback with an "upper limit of 800 billion yen / 30 million shares (5.5% of outstanding shares)."
The purchase period was supposed to be from August 3rd to October 30th.
It was expected to take about three months to buy.
However...
On August 10th, a disclosure of "Completion of Acquisition" was released. They used up 800 billion yen in just one week.
This is abnormal.
Normal buybacks take several months to buy gradually to level out the impact on the stock price. Exhausting the entire amount in one week means someone was selling in massive quantities, and they were forced to buy to absorb it.
So, who sold?
It was Toshiba.
Toshiba was a major shareholder of Kioxia. The 800 billion yen buyback was used in a way that caught Toshiba's sell-off.
And after Toshiba exited, SK Hynix emerged as the top shareholder.
SK Hynix is Kioxia's competitor. They are the world's second-largest in the NAND market after Samsung. That competitor has now become the top shareholder.
As an investor, three things are happening here:
Happening ①: The "Shield" is Gone
The buyback was a shield supporting the bottom price. If short sellers knew there was 800 billion yen in buying power, they wouldn't dare sell aggressively. But that shield disappeared in a week. There is no more ammunition to support the downside.
Happening ②: Toshiba "Escaped"
The fact that Toshiba sold at this timing suggests they may have judged this to be the peak zone. The major shareholder who knows Kioxia's internal affairs best has sold out. This signal is heavy.
Happening ③: A Competitor Became the Top Shareholder
SK Hynix being the top shareholder means they have influence over Kioxia's management. A competitor being able to have a say in management is usually a governance issue. However, looking at it conversely, a scenario where "SK Hynix acquires Kioxia" also comes into view. This ties into Bomb ③.
Bomb ③: Merger Negotiations with Western Digital Resumed
In mid-July, it was reported that Western Digital (WDC) resumed discussions regarding the integration of its NAND business with Kioxia.
WDC stock surged +12.5% to $548. (Analyst target price is $900).
Background: This isn't the first time
WDC and Kioxia (formerly Toshiba Memory) have been long-time partners, jointly operating NAND factories in Yokkaichi and Kitakami. Talk of a merger has been smoldering for years. They negotiated in the past, but it fell through due to valuation gaps and regulatory issues. Now, it has resumed.
Why now?
- Kioxia's stock price fell, narrowing the valuation gap.
- AI demand has structurally changed the NAND market, making economies of scale even more critical.
- The rise of China's YMTC has increased the need for a Japan-US alliance.
- WDC's 2026 HDD production is sold out, and long-term contracts are secured through 2028. They have the strength.
What happens if they integrate?
A world-class NAND manufacturer rivaling Samsung, SK Hynix, and Micron will be born. Toshiba is out, SK Hynix is the top shareholder, and WDC is proposing a merger. Kioxia's shareholder and business structures are being rewritten simultaneously.
Bomb ④: 9 Leveraged ETFs Under Preparation in the US
The final bomb was set from the outside.
Asset management firms in the US, such as Tuttle Capital, Corgi Strategies, GraniteShares, and Direxion, have applied for at least nine single-stock leveraged ETFs targeting Kioxia stock with the SEC.
This is the first time in history that US-listed leveraged ETFs have targeted an individual Japanese stock.
The CEO of Tuttle Capital says, "Japan will be the next growth market for single-stock leveraged ETFs."
Nikkei Veritas called this the "TSE Casino."
Why is this a bomb?
You can see what happened in South Korea. When leveraged ETFs targeting Samsung Electronics and SK Hynix were listed on the Korean market, volatility exploded. The KOSPI volatility index exceeded 75%, forcing regulators to stop new approvals.
Kioxia is already a stock that repeats limit-ups and limit-downs. If leveraged ETFs are added to this, volatility will explode further. Kioxia's stock price will no longer be determined solely by the company's performance. It could become a structure where the inflow and outflow of speculative money through leveraged ETFs dominates the stock price.
So, Which Bomb Will Explode First?
Which of the four bombs will reach a "conclusion" first?
Short-term: Leveraged ETFs (Weeks to Months)
Once SEC approval is granted, they will be listed immediately. The Tuttle CEO stated, "As early as this summer." If approved, Kioxia's volatility will change structurally.
Medium-term: WDC Merger Negotiations (Months to 1 Year)
Merger negotiations involve multiple steps: due diligence, valuation agreement, and regulatory approval. It takes at least six months, usually over a year. However, news that "negotiations are progressing" or "negotiations have failed" could come out at any time.
Long-term: NAND Market Supply-Demand Reversal (1-2 Years)
Increased production by China's YMTC and the 84 trillion yen capital investment plans by Korean firms. These are expected to cause actual oversupply in late 2027 to 2028. Whether Kioxia's monstrous earnings are a "peak" or a "passing point" will be decided here.
What Should Investors Watch?
To be honest, Kioxia is currently more of an object for "observation" than "investment." The risk is too high for individual investors to jump into a stock where four bombs are running simultaneously. However, the value of observing it is extremely high.
Point to Watch ①: Timing of Leveraged ETF Approval
If approved, volatility will change completely. That becomes both a trading opportunity and a risk of getting caught.
Point to Watch ②: Follow-up News on WDC Merger Negotiations
If there is "progress," Kioxia stock will skyrocket. If there is a "breakdown," it will plummet. The middle ground of "ongoing" is the hardest to read.
Point to Watch ③: Supply and Demand After the Buyback
Now that the shield is gone, the trends in margin buying and short selling balances will determine the stock's direction. Track supply and demand data weekly.
Point to Watch ④: News Related to China's YMTC
The supply structure of the NAND market will change depending on whether US semiconductor regulations against China are strengthened or relaxed.
Summary
What this stock teaches us goes beyond Kioxia as a single company.
The phenomenon of "stock price halving even with record-high profits."
The reality of "buybacks being used for major shareholders to sell out."
The risk of "leveraged ETFs dominating individual stock price movements."
The governance issue of "a competitor becoming the top shareholder."
These are all structural changes that could happen across the entire Japanese stock market.
Kioxia is standing at the forefront of that.
Therefore, regardless of whether you invest, it's better not to take your eyes off this stock. A stock where four bombs are running simultaneously is the best possible educational material.
