SK hynix launches record $29B share buyback and cancellation after stock loses half its value
The chipmaker will repurchase and retire 3.3 percent of its shares after its stock fell nearly 49 percent from its June peak.
SK Hynix headquarters are seen behind a traffic light on July 29.
NEWS1
SK hynix plans to buy back 40 trillion won ($29 billion) worth of its own shares over the next three months and cancel them to enhance shareholder value, the largest such share cancellation program on record by a listed Korean company.
The announcement came after a sharp reversal for one of the world's best-performing chip stocks, which has shed roughly half its market value since peaking in late June.
The Korean chipmaker also raised its shareholder return target to "at least" 50 percent of cumulative free cash flow, expanding on a November 2024 commitment to return "up to" 50 percent of the cumulative free cash flow generated between 2025 and 2027.
The company will buy back 24.07 million of its own shares, or about 3.3 percent of shares outstanding, on the open market between Aug. 20 and Nov. 19, then retire all of them once the purchase is complete.
The exact timing of the cancellation has not yet been determined. Canceling the shares, rather than holding them as treasury stock, reduces the total number of shares that share in the company's profit. Even if earnings stay flat, this raises earnings per share and increases the value of the stake held by existing shareholders.
If the full disclosed volume is retired, shares outstanding would fall to 706,422,365.
"Given meaningful free cash flow generation, the company is implementing an early return," the company said in a regulatory filing on Wednesday, adding that the timing also stems from its judgment that its share price is lower than its intrinsic value.
SK hynix continued to log a record-high operating profit of 60.54 trillion won in the second quarter, on the back of robust chip demand driven by the AI boom. Its cash-generating capacity also improved sharply, with net cash of 69 trillion won as of the end of the second quarter.
The 24.07 million share figure was calculated based on Monday's closing price of 1,662,000 won, the last trading day before the board approval. If the share price moves during the acquisition period, the final number of shares purchased and the cancellation amount could change, and these would be disclosed once the buyback is complete.
SK hynix shares closed at 1.5 million won on Wednesday, down 48.6 percent from a record high of 2,919,000 won on June 22.
The sum roughly matches the value of new shares issued for the U.S. American depositary receipt listing, which represented 2.5 percent of total shares outstanding.
Domestic brokerages had earlier projected that the company was preparing a shareholder return package totaling 100 trillion won, with 40 trillion won for share buybacks and 60 trillion won for cash dividends.
Further details on shareholder returns, including dividends and additional share buybacks, will be announced around the time of third quarter earnings in October. The measures were not disclosed at the second quarter earnings release last month due to the 25-day prospectus delivery period following the company's American depositary receipt listing on July 10, which made it difficult to release new information.
BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]
