Companies rush to retire treasury stocks ahead of ‘corporate value-up’ program

An electronic signboard at Seoul's Hana Bank shows the benchmark KOSPI closing at 2,620.32 points, up 10.74 points  from the previous session, on the eve of the Lunar New Year holiday, Thursday. Yonhap

An electronic signboard at Seoul’s Hana Bank shows the benchmark KOSPI closing at 2,620.32 points, up 10.74 points from the previous session, on the eve of the Lunar New Year holiday, Thursday. Yonhap

By Yi Whan-woo

An increasing number of companies listed on the Korean stock market are buying back treasury stocks and retiring them, in line with the government’s forthcoming program aimed at boosting the prices of undervalued stocks and shoring up shareholders’ returns.

Known as the Corporate Value-up Program, the new financial initiative was first announced by the Financial Services Commission (FSC), and details will be released this month.

The aforementioned companies include SK Innovation and DL E&C — all chaebol affiliates listed on the benchmark KOSPI — and SM Entertainment, a K-pop powerhouse on the junior bourse Kosdaq.

According to industry sources, SK Innovation plans to retire a total of 4.91 million treasury stocks, worth 793.6 billion won, on its path to ensure a 30 percent dividend for shareholders.

It will be the first time SK Innovation will retire its shares after it was launched as the energy arm of SK Group in 2011.

DL E&C, the flagship affiliate of DL Group, decided to retire 2.93 million shares that it repurchased after issuing them.

The shares make up 7.6 percent of the firm’s entire stocks. The decision was made by the board of directors “to ensure and protect shareholders’ rights in a preemptive manner,” according to a board member.

HD Hyundai Construction Equipment is set to retire 590,000 treasury stocks, which amounts to 7.2 percent of the shares it issued.

It’s the first time for the company to do so after it spun off from Hyundai Heavy Industries in 2017, now known as HD Hyundai Heavy Industries.

SM Entertainment plans to retire 1 percent of its stocks, which will be 241,379 shares and is worth 14.9 billion won.

Some other listed companies are opting to increase dividends at a steeper pace instead of retiring treasury stocks.

For example, Hyundai Motor and Kia, all affiliates of Hyundai Motor Group, increased the entire amount of dividends by 63.8 percent and 58.1 percent, respectively, on the back of their record earnings in 2023.

Hyundai Motor chalked up an all-time high annual operating profit of 26.7 trillion won, while Kia’s profit also reached new heights at 11.6 trillion won.

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