SK Hynix frees up around €25bn for share buyback
In an attempt to boost its market valuation, SK Hynix has announced a share buyback programme worth 40 trillion won, roughly €25 billion.
After a period of unprecedented profits in the second quarter, the South Korean semiconductor giant plans to repurchase 24.1 million of its own shares from Thursday until 19 November. These shares will then be cancelled in order to increase the overall value for investors.
The company explained that this strategic move stems from the conviction that the current share price does not accurately reflect the company’s true value. According to SK Hynix, that value is underpinned by strong cash flow, a competitive market position and long-term growth prospects.
Although SK Hynix wants to reward shareholders, the company stated that it intends to keep its financial structure stable. This buyback is, remarkably, the largest cancellation of treasury shares by a listed company in South Korean history.
The timing of this announcement follows a sharp market drop on Wednesday, during which SK Hynix’s share price plunged by nearly 10%. This volatility was driven by investor concerns about inflation and rising bond yields, partly fuelled by geopolitical tensions between Iran and the United States.
Similar trends were visible in the broader market, with the KOSPI index falling by 5.8% and Samsung Electronics posting a decline of 7.8%.
Despite a 130% share price increase this year, driven by strong demand for AI-capable memory chips, the stock has recently run into headwinds.
Concerns about overinvestment in AI led to a 35% drop last month, followed by a further decline of 12.7% this month.
This corporate measure ties in with broader national objectives. The Lee Jae-myung government is urging listed companies to cancel their own shares to combat the ‘Korea discount’, a phenomenon in which poor governance and minimal payouts to shareholders lead to an undervaluation of domestic stocks.
In addition, SK Hynix is raising its target for shareholder returns to more than 50% of cumulative free cash flow, an increase compared with the previous aim of staying below that threshold.
At the same time, the South Korean government is supporting a large-scale €453 million project to establish a new production hub in the southwest of the country. This hub, planned by the country’s two largest chipmakers, is intended to meet growing global demand for memory semiconductors.
Business AM
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