As of the end of March, a total of 18 companies listed on South Korea’s KOSPI and KOSDAQ exchanges hold treasury stocks exceeding 20% of their total shares. This significant accumulation of treasury stocks has sparked discussions about corporate strategies for enhancing shareholder value, particularly in light of recent regulatory changes and market performance.
Among these companies, all have seen their stock performance fall below the one-year KOSPI yield of -9.7%. Notable names include Ilseong IS, Telcoware, Moatech, Youngheung, Lotte Holdings, Daehan Textile, TY Holdings, Hanssem, Jungang Enervis, Kwangdong Pharmaceutical, SK, Creverse, Coreana, Corestem Chemon, Pureun Savings Bank, Seoul Gas, E-Future, and Dongyang. These companies are now under scrutiny as investors and analysts question their commitment to shareholder returns.
Starting this year, South Korean regulations mandate that companies holding more than 5% of treasury stocks must include a detailed treasury stock report in their business reports. This move aims to increase transparency and accountability regarding how these stocks are managed. Despite this requirement, some companies have yet to release their business reports for March settlements or omitted necessary disclosures.
Lotte Holdings stands out as the only company among those with high treasury stock holdings to announce plans to consider stock cancellation as part of its strategy to enhance corporate value. However, the company has not specified when or how much stock it intends to cancel.
The issue is further compounded by the fact that several companies with over 20% treasury stocks have not paid dividends for three consecutive years. These include Daedong Electronics, Daehan Textile, DAP, Moatech, Mirae Asset Life Insurance, Youngheung, Jokwang Leather, and Coreana. Such a lack of dividend payments raises concerns about these firms’ intentions towards shareholder returns.
Choi Kwan-soon from SK Securities commented on the situation: “The purpose of acquiring treasury stocks is to enhance corporate value. If stock prices are sluggish despite holding a large amount of treasury stocks, stock cancellation can be considered.” Choi also noted that companies failing to pay dividends or engage in stock cancellations might need to reconsider their approach to shareholder returns.
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