'Value Up 1 Year' Active Share Buyback... Listed Companies Burned 21 Trillion in 5 Months [6·3 Presidential Election]

Lee Jae-myung, the presidential candidate of the Democratic Party of Korea, mentioned the institutionalization of share buybacks as a plan to revitalize the stock market, drawing attention from the market. Meanwhile, it was found that the scale of share buybacks this year exceeded last year's annual buyback scale in just 5 months.

On the 29th, according to the Korea Exchange, the scale of share buyback decisions announced by listed companies in the KOSPI and KOSDAQ markets this year until the 21st reached 20.71 trillion won.

The entire buyback amount last year, when shareholder value enhancement policies were highlighted as the value-up program was promoted, was surpassed in just 5 months (13.9 trillion won). Before the implementation of the value-up program, the annual share buyback scale in 2022 and 2023 was only 3.1 trillion won and 4.8 trillion won, respectively. Share buyback is an act where a company acquires and then eliminates shares circulating in the market. In this case, the number of issued shares decreases, increasing the per-share value. From an investor's perspective, the stock price of the holdings rises, leading to direct profits.

The company that announced the largest scale of share buybacks this year is Samsung Electronics. Samsung Electronics canceled 50.14 million common shares and 6.91 million preferred shares worth 3 trillion won on February 20. Of the recently purchased 3 trillion won worth of treasury shares, 500 billion won intended for executive compensation will be excluded, and 2.5 trillion won worth will also be canceled. After this share buyback, Samsung Electronics will have canceled 5.5 trillion won worth of treasury shares in the first half of this year alone.

Recently, corporate share buybacks have gained attention as candidate Lee Jae-myung pledged to institutionalize the principle of share buybacks as one of his major presidential campaign promises to ensure shareholder profit returns.

Candidate Lee appeared on a YouTube live broadcast the previous day and said, "(Minority shareholders demand that the company must cancel treasury shares without exception, but on the other side, they say some exceptions are needed)," adding, "We need to discuss specific methods and decide in detail." He continued, "There are cases where the company's money, that is, shareholder money, is used as a means of evasion to buy treasury shares and then sell them to a white knight, benefiting the private interests of a minority controlling shareholder," adding, "(Including such cases), we will try to create a system as soon as possible."

The market welcomes the principle of share buybacks proposed by candidate Lee for listed companies. Lee Sang-heon, a researcher at iM Securities, said, "Despite the implementation of institutional improvements such as strengthening treasury share disclosures, some companies still use treasury shares for pursuing the private interests of controlling shareholders, such as defending management rights," adding, "The principle of share buybacks should have been introduced earlier as one of the policies for improving governance and shareholder returns."

As candidate Lee reiterated the institutionalization of the principle of share buybacks, the stock prices of stocks with a high proportion of treasury shares are also soaring. The stock price of Shin Young Securities, with a treasury share proportion of 53.1%, rose 3.92% on the day. Similarly, the stock prices of Lotte Holdings (13.21%) and SK (8.32%), which also have a high proportion of treasury shares, surged on the day.

nodelay@fnnews.com Park Ji-yeon Reporter