Korean Listed Firms Cancel 20 Tril. Won Worth of Treasury Stocks during Past 3 Years

The amounts of treasury stock purchased and canceled by Korean listed companies in the past three years exceeded 19 trillion won and 20 trillion won, respectively. Stock market experts point out that shareholder return is still insufficient because most of the treasury stock purchases and cancellation were done by a small number of companies including Samsung Electronics.

A total of 676 KOSPI- and KOSDAQ-listed companies reported treasury stock purchases to Korea Exchange between 2017 and August 2019, according to the Korea Corporate Governance Service. These companies purchased treasury stocks worth 19.06 trillion won, or an average of 20.6 billion won per company.

The number of companies that acquired treasury stocks swelled from 208 in 2017 to 307 in 2018 and 154 in the January to August period of this year. Samsung Electronics excelled other companies by spending 9.22 trillion won on purchasing treasury stocks. It was followed by SK Hynix (1.73 trillion won) and SK Innovation (1 trillion won).

Since the beginning of this year, financial companies such as Shinhan Financial Holding, Hana Financial Group, and Orange Life have actively purchased treasury shares.

“In 2018, Korean financial firms’ price-to-book ratio (PBR) was 0.46, the lowest level in the world,” researcher Yoon So-jung said. “We believe they purchased treasury stocks to boost their stock prices and realize shareholder return as their stock prices continue to fall this year.”

From 2017 to August 2019, a total of 46 companies canceled treasury stocks on a total of 62 occasions, with the aggregate value of the stocks canceled reaching 20.79 trillion won. One company canceled an average of 335.4 billion won on average.

Samsung Electronics canceled 18.68 trillion won worth of treasury stocks in 2017 and 2018, accounting for 89.81 percent of the total value of the stocks canceled by Korean companies. The cancellation amount of the 45 companies excluding Samsung Electronics stood at only 2.12 trillion won.

This year, Samsung Electronics did not cancel treasury shares. The total value of treasury cancellation by Korean companies amounted to 417.8 billion won this year, an average of 29.8 billion won per company.