Third Point urges SK square to pursue aggressive share buybacks

Daniel Loeb, CEO and founder of Third Point.

Daniel Loeb, founder of activist hedge fund Third Point, is expected to step up an engagement-driven strategy centered on SK square, calling for stronger shareholder-friendly capital policies, industry sources said Wednesday.

Third Point said it has been in active dialogue with SK square since initiating its investment in the third quarter of last year, discussing ways to unlock shareholder value. The fund has built what it describes as a “meaningful” stake in both SK square and its key asset, SK hynix, at a level that warrants direct engagement with management.

Loeb said he has met members of SK square’s board since last summer to present concrete proposals aimed at addressing valuation discounts, adding that Third Point holds a larger position in the more liquid SK hynix shares. SK hynix’s stock has risen by more than 200 percent since the second quarter of last year.

Widely regarded as a benchmark figure in modern shareholder activism, Loeb is known for pushing beyond short-term share price gains to drive structural reforms and capital policy changes. Since founding Third Point in 1995, he has played a key role in reshaping global companies, including management changes and restructuring at Yahoo in 2012 and board refreshment and cost-cutting measures at Disney in 2022.

Third Point has highlighted what it sees as persistent undervaluation at SK hynix, estimating that the company’s price-to-earnings ratio based on 2026 earnings stands at just 6.5 times. Based on the closing price on Feb. 3, this implies Third Point expects SK hynix’s net profit to exceed 100 trillion won ($68.5 billion) this year. Loeb said SK hynix has already overtaken Samsung Electronics in the next-generation high-bandwidth memory market and remains the most undervalued name in an already discounted global memory sector.

While expressing strong confidence in SK hynix’s fundamentals, Third Point has proposed the issuance of American depositary receipts as a capital market strategy to improve liquidity and accessibility for global investors. Loeb said continued efforts toward an ADR listing would enhance SK hynix’s standing as a core beneficiary of global artificial intelligence infrastructure expansion.

Third Point is also calling on both SK hynix and SK square to allocate a greater portion of free cash flow to shareholder returns. In particular, the fund argues that SK square, which trades at a steep discount to its net asset value, should divest non-core minority stakes and even consider leverage to fund large-scale share buybacks and cancellations worth several trillion won.

SK hynix, which is expected to shift from a net debt position to a net cash structure as early as the first quarter of this year, could also justify share buybacks as a rational means of returning capital, given its earnings outlook and potential for further share price appreciation, according to Third Point.

“Share buybacks are the single best investment SK square can make,” Loeb said, adding that the company should repurchase as many of its own shares as possible, even if it requires borrowing.

Despite the proposals, Third Point said it does not plan to launch an aggressive activist campaign ahead of this year’s annual general meeting. The fund also ruled out so-called “wolf-pack” tactics, in which multiple activist investors coordinate pressure on management, similar to campaigns seen at Samsung C&T’s shareholder meeting in 2024.