SK’s Decision ‘Surprises’ Market As Treasury Share Cancellations ‘Jump’ Twofold Ahead of AGM
SK decided to cancel all 14.69 million treasury shares except those reserved for employee compensation is assessed as exceptional. (Photo courtesy of SK Group)
The number of listed companies announcing treasury share cancellations has more than doubled compared to last year, ahead of the first annual general meeting (hereinafter “AGM”) since the implementation of the third Commercial Act amendment, which mandates treasury share cancellation. Securities analysts suggest that if companies with substantial treasury share holdings that have not yet decided on cancellation proceed with related disclosures, it could positively impact stock prices.
According to DART (the Financial Supervisory Service’s electronic disclosure system) on March 16, a total of 150 companies disclosed decisions to cancel treasury shares from Jan. 1 to March 15. This is more than double the figure from the same period last year (67 companies).
Market observers point to the implementation of the third Commercial Act amendment, which includes mandatory treasury share cancellation, on the 6th as the background for the increase in companies disclosing treasury share cancellation decisions. Analysis suggests that while the Value-up Program implemented in 2024 emphasized corporate autonomy, this amendment has institutionalized shareholder returns to a certain extent, prompting corporate action.
Companies that have disclosed treasury share cancellation decisions this year include holding companies and financial stocks with high treasury share ratios such as SK, POSCO Holdings, Mirae Asset Life Insurance, SK Securities, Kiwoom Securities, and Mirae Asset Securities. Additionally, Kumho Petrochemical, Binggrae, Shift Up, and Amorepacific have joined the treasury share cancellation wave, spreading the momentum across various sectors.
The market particularly views SK’s treasury share cancellation decision as a forward-looking move. Considering that treasury shares served as a key defense mechanism when foreign hedge fund Sovereign Asset Management attempted a hostile M&A (merger and acquisition) against SK in the past, the decision to cancel all 14.69 million treasury shares except those reserved for employee compensation is assessed as exceptional.
Kim Su-hyun, an analyst at DS Investment & Securities, stated, “The treasury shares SK has decided to cancel represent approximately 20% of its market capitalization,” adding, “This is capital of a scale that could have funded large-scale M&A in future growth businesses such as AI (artificial intelligence), semiconductors, and bio, or could have been used for debt repayment, yet they chose the most direct form of shareholder return. Additionally, considering the increase in subsidiary values including SK Square and SK Pharmteco, we have raised our target price from 450,000 won (around $310) to 630,000 won.”
Securities analysts see the possibility of additional treasury share cancellation disclosures continuing during the AGM period. They analyze that as KOSPI valuations have been readjusted due to geopolitical risks such as the Iran situation, significantly diluting the momentum of the third Commercial Act amendment, future related disclosures could serve as momentum for individual stocks and the broader market.
According to DB Financial Investment, among KOSPI 200 constituents that are December fiscal year-end companies with treasury share ratios of 10% or more based on common shares, those that have not disclosed treasury share cancellation decisions this year include Daewoong (29.67%), Hanssem (29.46%), Taekwang Industrial (24.41%), KCC (17.24%), Ottogi (14.18%), Youngone Holdings (14.03%), Cheil Worldwide (11.96%), and DN Automotive (11.53%).
Analysis also suggests that treasury share cancellation disclosures could serve as a catalyst for the re-entry of foreign investors, who have shown net selling patterns this year. A securities industry source stated, “Foreign investors are attracted to the changing Korean stock market, but at the same time cannot shake their doubts about whether shareholder returns will continue,” adding, “If forward-looking announcements continue at this AGM, foreign investor capital could re-enter the market.”
Yoon Young-sil
pr@businesskorea.co.kr
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