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Written by Lee Yeon-woo
The growing influence of activist funds and individual investors has led public companies to increasingly adopt shareholder-friendly practices such as buying back their own shares, industry officials said on Sunday. . This trend is expected to continue until 2024.
According to the Korea Exchange, 254 listed companies have announced plans to buy back their own shares worth a total of 9.16 trillion won ($7.05 billion) over the next few years starting in 2023.
In addition to these plans, both companies have already acquired treasury stock this year, with a total investment of 7.4 trillion won. This represents a significant increase of 21.2 percent compared to purchases made in 2022, indicating an increasing trend in such shareholder-friendly activities.
Companies in the financial and communications sectors, traditionally known for their high dividends, have been particularly notable for recent acquisition activity. Leading companies in terms of acquisition value are Meritz Financial Group, SK Telecom, KT, KB Financial Group, Hana Financial Group, and Shinhan Financial Group.
Analysts believe this policy could create a win-win situation for both shareholders and companies. Companies can also emphasize efforts to strengthen ESG management and use those efforts as part of their financial policies.
There is a growing movement to require companies to not only purchase their own stock but also cancel it afterwards. The market’s main concern is that if a company holds treasury stock without canceling it, it may later choose to sell these shares to the market, diluting the value of its existing stock.
This movement is particularly noticeable among activist funds.
Recently, City of London Investment Management, a UK-based activist fund, demanded that Samsung C&T buy 500 billion won worth of its own shares by 2024. Another UK-based fund, Palliser Capital, called for the cancellation of its own shares. Additionally, KCGI Asset Management pressured Hyundai Elevator to cancel all treasury stock it currently holds, which is equivalent to 7.64% of the total number of outstanding shares.
As a result, the number of treasury stock cancellations has increased significantly.
The listed company announced plans to cancel 5.4 trillion won worth of treasury stock in 2023. This amount represents 70% of the total amount of treasury stock purchased in 2023 and marks a significant 500% increase compared to the average of the previous five years.
Market participants expect this trend to continue until 2024, due to increased investor interest in shareholder returns.
“Companies are becoming more proactive in responding to shareholder demands,” said Hwang Se-eun, a senior researcher at Korea Capital. “It can also be seen as a reflection of our sincere efforts.” Market Research Institute.
“We expect to see further expansion in shareholder demands for both share buybacks and cancellations,” Huang added.
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