Korea Exchange announced on Dec. 22 that listed South Korean companies’ treasury stock acquisition totaled 3,481.2 billion won this year, down about 46 percent from a year ago. The amount, which exceeded 11 trillion won in 2016, has fallen since 2017 to reach a five-year low this year.
This is because the companies refrained from using cash in hand due to mounting uncertainties and poor business performances and treasury stock acquisition was not helpful for their stock prices in many cases. The number of cases of treasury stock acquisition fell, too. Specifically, the number rose from 283 to 421 from 2015 to last year but stood at 257 this year.
Their direct treasury stock acquisition added up to 9.9 trillion won in 2015 and remained over nine trillion won in 2016 and 2017. However, it dropped to approximately five trillion won in 2018 and stands at 2,338.5 billion won at present. In contrast, trust-based treasury stock acquisition did not fall that much. It totaled 1.6 trillion won or so in 2016 and about 1.1 trillion won this year.
The decline in treasury stock acquisition is attributable to those companies’ financial conditions. In the third quarter of this year, 579 KOSPI-listed companies’ current net profits totaled 17.2 trillion won, down about 50 percent from a year earlier.
The companies focused on cash accumulation with policy and global uncertainties mounting. According to the Korea Economic Research Institute, 529 listed companies’ cashable assets added up to 289 trillion won in the first half of this year, down 2.6 percent in six months, with their business performance and operating cash flow falling more than 30 percent and more than 20 percent from a year ago, respectively.
Their treasury stock acquisition has contributed little to shareholder value enhancement, that is, their stock prices. For example, 11 companies decided to purchase treasury stocks in September this year and the stock prices of only five out of the 11 rose until Dec. 20, including Hyundai Mobis (up 5.43 percent) and Daishin Securities (up 6.87 percent).