Companies that opted for direct share buybacks during volatile market periods have recorded higher stock price gains compared to those using trust-based methods. An analysis of share buyback disclosures over the past six weeks revealed that the average return for companies that directly purchased their shares was approximately 1.8 times higher than those that used trust methods.
According to the Korea Exchange on October 14, there were a total of 65 share buyback disclosures from KOSPI and KOSDAQ listed companies between September 1 and October 13. Of these, 60 disclosures were analyzed for stock price changes over the following week, with 47 (78.3%) showing an increase. The average increase was 4.78%. On the day after the disclosures, 46 out of 64 companies (71.9%) also saw their stock prices rise, with an average return of 3.25%.
In terms of acquisition methods, the average return for the 27 companies that disclosed direct purchases was 6.33%, which was 2.82 percentage points higher than the 33 companies that used trust methods, which averaged 3.51%. The median returns were also different, with direct purchases at 4.49% and trust purchases at 2.86%. The proportion of companies with rising stock prices was 85.2% for direct purchases and 72.7% for trust purchases. Direct purchases involve companies buying back shares through brokerage firms, while trust purchases involve delegating the buyback to financial institutions.
Performance varied among companies. KSS Shipping saw a 23.56% increase in stock price in the week following its disclosure on September 22, while KoYoung and Hanssem rose by 18.54% and 15.89%, respectively. Conversely, Jahwa Electronics experienced a 13.55% drop following its disclosure on October 2, and Seongkwang Bend recorded a 7.12% decline.
The actual buyback performance also showed discrepancies. Out of the 65 disclosures, 61 had confirmed cumulative transaction amounts. Of the 30 direct purchases, 29 had confirmed amounts, while 32 out of 35 trust purchases were confirmed. The median ratio of cumulative transaction amounts to reported amounts was 38.0% for direct purchases and 22.5% for trust purchases, reflecting a 15.5 percentage point difference.
KoYoung's cumulative transaction amount was approximately 15.49 billion won, exceeding its reported amount of about 13.13 billion won. Clean & Science and Gaon Chips also purchased nearly 99.99% and 99.98% of their reported amounts, respectively. However, due to varying acquisition periods among companies, it is difficult to definitively conclude the final execution rates of cumulative transactions.
A securities industry official stated, “Share buyback disclosures can positively influence investor sentiment as they demonstrate a company’s commitment to stabilizing its stock price. However, it is essential to assess the actual execution of buybacks and plans for retiring the repurchased shares rather than relying solely on short-term stock price increases to evaluate shareholder return effects.”
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.