Key points
- 40 trillion won ($28.6B) buyback, the biggest ever by a Korean listed company, all of it to be cancelled.
- Approved hours after SK Hynix closed down 9.75% in Seoul, as the Kospi fell 5.80%.
- 2025 to 2027 payout target raised to 50% or more of free cash flow.
SK Hynix's board voted on Aug. 19 to repurchase 40 trillion won ($28.6 billion) of the company's shares and cancel them. No Korean listed company has ever announced a larger buyback and cancellation. The decision came only hours after the stock finished the Seoul session at 1,500,000 won ($1,071), down 9.75 percent, while the Kospi lost 5.80 percent. The board also revised its payout target for 2025 to 2027, raising it from no more than half of free cash flow to at least half.
Aug. 19 was one of SK Hynix's worst trading days of the year. Its shares dropped 9.75 percent to 1,500,000 won ($1,071), and the Kospi fell 5.80 percent to 6,471.17. Foreign and institutional investors were selling against a backdrop of rising global interest rates. After trading ended, however, the board approved a share purchase so large that it nearly overshadowed the day's selloff.
The detail that matters is what happens to the shares. SK Hynix said it will cancel the ones it buys, not keep them in treasury to reissue later. Cancelled shares are retired for good, so the total count falls. Korean outlets called it the largest buyback and cancellation a listed company has ever done in the country.
The plan covers 24.07 million shares, about 3.3 percent of the 730 million or so outstanding. SK Hynix will buy them on the open market from Aug. 20 to Nov. 19, then cancel them. The size was set against the Aug. 18 close of 1,662,000 won ($1,187). The board also lifted the payout target for 2025 to 2027, from up to half of free cash flow to half or more.
The announcement didn't rescue the day, since it came after the market had closed. It moved the after-hours session instead. SK Hynix recovered to 1,601,000 won ($1,144), about 6.7 percent above its close, though still under where it opened the morning.
Why now
Two things are behind it, and neither one is panic. The AI-memory boom has been throwing off cash, so SK Hynix is pulling its shareholder plan forward instead of waiting out the original timeline. Hankyung (한국경제) puts the whole program at up to 100 trillion won ($71 billion) in returns, of which this buyback is one part. The company's estimated free cash flow for the year is about 180 trillion won ($129 billion), so the money is there.
The second reason is a fight over how the market values the company. Lee Jae-won, an analyst at Yuanta Securities (유안타증권), was direct about it. "At a moment when rising market rates have made valuations harder to carry, this confirms that better earnings are actually turning into shareholder returns," he wrote. "It is a strong catalyst for re-rating and for defending the share price."
Roh Keun-chang at Hyundai Motor Securities (현대차증권) read it the same way. "Returning more than half of free cash flow through 2027 reflects confidence in the business," he wrote, and he expects it to be a strong catalyst for the stock. Kim Young-gun at Mirae Asset Securities (미래에셋증권) pointed past the headline number. "The plan to return more than half of free cash flow is a more positive point than the 40 trillion won figure itself," he wrote.
Not everyone called it a bottom. Choi Bo-young at Kyobo Securities (교보증권) was careful. "It is a positive in theory, but some of the buying is event-driven, so the short-term effect on the price is hard to predict," she wrote. Jung Woo-sung at LS Securities (엘에스증권) made a similar point, that wider shareholder returns alone won't close the distance between the stock and his target price.
There's a word Korean investors use for this. They call it the 코리아 디스카운트, the Korea discount, the standing markdown Korean stocks carry against foreign peers. It usually gets blamed on weak governance and a long reluctance to buy back and cancel shares in a way that actually shrinks the float. A record buy and cancel is close to a direct answer to it.
Samsung is next in line
The move also turned the pressure toward Samsung (삼성전자). A minority-shareholder group called ACT (액트) has been pushing Samsung to do the same, and it wasn't gentle after SK Hynix acted. Cho Dae-hyun, an expert adviser at ACT, said Samsung has stayed quiet too long. "Competitors that earn less than Samsung are moving toward returning 97 to 100 percent to shareholders, while Samsung, which just posted its highest profit ever, has stayed at a 50 percent policy and gone three weeks without a specific announcement," he said. ACT wants Samsung to commit to buying back at least 45.5 trillion won ($32.5 billion) of its own stock.
That matters for more than Samsung. The two chipmakers together are most of the Kospi's value, so whether Samsung follows is one of the larger questions for where the index goes next. I wrote about how big their combined payout math has become here.
One more thing from the session. While foreigners and institutions sold, Korean individual investors bought about 4.4 trillion won ($3.1 billion) of stock net on the day. Foreigners sold about 1.83 trillion won ($1.3 billion) of SK Hynix alone. So a company-funded buyback this size landed on top of a day when Korean retail was already buying the drop, the same split between foreign sellers and local buyers I've covered before.
The buying starts Aug. 20. Meanwhile, Samsung still hasn't said what it will do.
Sources
- 뉴스핌, [특징주] SK하이닉스, 40조 대규모 자사주 매입·소각…시간외서 급등, on the close and the after-hours recovery.
- 머니투데이, SK하이닉스의 역대 최대 주주환원…증권가 "강력한 주가 모멘텀", on the analyst reaction and quotes.
- 한국경제, SK하이닉스, 100조 주주환원 시동, on the size of the full shareholder-return program.
- 뉴스웨이, 'SK하이닉스는 40조원 결단했는데'…액트, 삼성전자 자사주 매입·소각 촉구, on ACT's pressure on Samsung.
Analyst and ACT comments are translated from Korean. Figures are from South Korean market reporting, converted to US dollars at about 1,400 won to the dollar. This is general market commentary and not investment advice.
