S. Korean firms turn to stock buyback to boost price amid bearish market wave

There is a growing list of South Korean companies announcing a share buyback to appease disappointed investors and improve shareholder value amid the bearish market mood.

According to Korea Exchange on Sunday, 35 companies listed on Kospi or Kosdaq announced buyback schemes in May, including a recent case of LG Corp. that vowed to buy back its own shares worth 500 billion won ($399.4 million) by the end of 2024. A chunk of them is pharmaceutical and bio majors whose stock prices have tumbled in recent months.

Celltrion announced a buyback program three times this year alone to buy back 251.2 billion won worth of shares. Its stock price halved to 156,000 won from the peak of 294,935 won last August.

On Thursday, Humasis said it will stabilize its stock price and enhance shareholder value by acquiring 20 billion won worth of its own shares. Cancer detection test developer Genomictree and medial material developer Wonbiogen unveiled 5 billion won and 3 billion won buyback schemes this month, respectively.

Chip material, component, and equipment manufacturers are joining the move. On May 13, Hansol Chemical announced a 57 billion won share repurchase program. ITM Semiconductor and Protec also disclosed 10 billion won and 12.3 billion won worth of share buyback scheme each.

Company representatives are also personally taking part in the share buyback scheme to appease shareholders.

Last week, Prestige Biopharma said that its chief executive Park So-yeon and vice chairman Kim Jin-woo purchased 138,206 of its own shares worth 2 billion won. The company’s stock price had tumbled after media reports that its Herceptin biosimilar HD201 under development failed to receive marketing approval in Europe.

Jang Dong-bok and Kang Im-soo, co-chief executives of chip equipment manufacturer YEST Corp., and other special interested parties also purchased 239,710 company shares on May 3.

There are concerns, meanwhile, about the limited impact on the stock price if the companies refrain from share cancellation after buyback. L&F announced a share buyback of 1 million shares worth 276.6 billion won last Tuesday but its stock price tumbled in the following four days. L&F shares fell 11 percent between May 24 and 27, losing 1.18 trillion won in market cap. It also lost momentum for a stock boost from its supply contract with LG Energy Solution announced on May 19. The 2.73 million shares held by L&F also poses pressure on the stock price.

“There are concerns that companies buying their own shares and disposing them in the market after a certain period of time without cancelling them will have limited impact on boosting stock prices,” said Kang So-hyun, a researcher at Korea Capital Market Institute. “They will only be used for temporary purposes such as profit taking by selling those treasury shares.”

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]