Share buybacks are typically seen as a positive signal, but actual stock performance has not met expectations. Among companies that announced share buybacks this year, 40% saw their stock prices decline one month later.
According to the Korea Exchange, as of August 5, among the 309 listed companies that disclosed share buybacks (including direct purchases, trusts, and stock options), 125 companies (40.5%) had lower stock prices one month later compared to the announcement date.
There was little variation across markets. In the KOSPI market, 49 out of 138 companies (35.5%) saw their stock prices drop the day after the announcement. A week later, 42 out of 134 companies (31.3%) experienced declines, and one month later, 41 out of 105 companies (39.0%) recorded lower prices.
The KOSDAQ market showed similar trends. The day after the announcement, 77 out of 255 companies (30.2%) saw their stock prices fall. A week later, 76 out of 247 companies (30.8%) experienced declines, and one month later, 84 out of 204 companies (41.2%) had lower prices. Notably, the largest declines were seen in KOSDAQ-listed companies: Samhwa Networks (-21.74%) the day after the announcement, Madup (-20.53%) a week later, and Alt (-38.50%) one month later.
Market analysts suggest that the method of utilizing share buybacks has a greater impact on stock prices than the buybacks themselves. When shares are canceled, the number of outstanding shares decreases, potentially improving earnings per share (EPS) and return on equity (ROE). However, if the acquired shares are retained or used for employee compensation or mergers and acquisitions, the effect on shareholder value may be limited.
In a recent report, Kang Jin-hyuk, a researcher at Shinhan Investment Corp, stated, "Investors should pay attention to whether a company's share buyback leads to actual cancellations rather than being a mere tool for stabilizing stock prices." He added that companies with a high proportion of buybacks and ample cash reserves are likely to see greater improvements in EPS and ROE through active buyback and cancellation processes. He noted, "The purpose of share buybacks and financial conditions vary by company, and with further regulatory adjustments pending, it is still difficult to determine the extent of cancellations."
Meanwhile, the exchange reported that last month, Shinhan Financial Group (July 23, 700 billion won), KB Financial Group (July 23, 700 billion won), Hana Financial Group (July 24, 250 billion won), and Woori Financial Group (July 24, 150 billion won) conducted share buybacks and cancellations. The exchange explained, "Decisions on share buybacks and cancellations have been actively made among financial holding companies, indicating a robust trend in returning value to shareholders."
* This article has been translated by AI.
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