More listed firms cancel shares amid shareholder return drives

President Lee Jae Myung attends a meeting at the Korea Exchange in Yeouido, Seoul, June 11. News1

An increasing number of listed firms have been cancelling shares over the past three months, prodded by the Lee Jae Myung administration’s drive to enhance minority shareholder rights, data showed Monday.

According to Financial Supervisory Service data, a combined 45 KOSPI- and Kosdaq-listed companies made disclosures on their share cancellation plans from June 3 to Aug. 14, up 50 percent from the same period a year earlier.

About 145.27 million shares worth over 5.8 trillion won ($4.1 billion) will be canceled, up 256 percent and 164 percent from the same period last year, respectively.

Of the 45 cases, 30 were cancellation of shares previously bought back.

Share buyback for cancellation means the total number of shares lowers, which translates into higher share prices.

However, some firms bought company shares not for cancellation but as a means to protect the managerial rights of major shareholders, often those with controlling stakes.

This led to some lawmakers pushing for revisions to the Commercial Act, requiring such purchased shares to be cancelled by law.

The businesses say the mandatory rule makes hostile takeovers by large capital-rich investors easy, but minority shareholders say the revision is a long-awaited step towards tackling the “Korea discount,” the country’s chronic undervaluation of shares in the equity market.

Many say the revision will bolster Lee’s drive to raise Korea’s main stock market benchmark, the KOSPI, to 5,000 points.

Meanwhile, KOSPI- and Kosdaq-listed firms have announced a combined 177 share cancellation plans this year. About 415.3 million shares worth over 18.2 trillion won will be cancelled.