More Frequent Stock Price Declines Than Before Acquisition
Achieved Intended Results in Stock Price Defense
Frequent Disposals for Bonus Payments
Undermining the Goal of 'Enhancing Shareholder Value'
[Asia Economy Reporter Park Jihwan] What was the actual effect on stock prices of securities firms that repurchased their own shares this year? The conclusion is that more firms saw their stock prices decline compared to before the buybacks. However, considering the overall sluggishness in the securities sector recently, it is evaluated that the buybacks achieved the intended effect of stock price defense.
According to the Financial Supervisory Service on the 31st, Meritz Securities, Mirae Asset Securities, KTB Investment & Securities, SK Securities, and Shin Young Securities announced share repurchase plans this year. Last month, Meritz Securities signed a trust contract worth 140 billion KRW for acquiring treasury shares with Samsung Securities. This is the third share repurchase plan following acquisitions worth 100 billion KRW each in March and June. Mirae Asset Securities repurchased shares twice in January and September, with a total purchase volume of 20.5 million common shares and 3 million preferred shares. KTB Investment & Securities also decided on two rounds of share repurchases, while SK Securities plans to directly acquire 19 million common shares through on-market purchases by January 13 next year. Shin Young Securities acquired 158,532 treasury shares over four rounds in January, February, April, and July.
Looking at the stock prices as of the day before the announcement of these securities firms' share repurchases, SK Securities and Meritz Securities showed significant stock price appreciation effects. SK Securities' stock price rose 13.9% from 878 KRW at the time of the announcement to 1,000 KRW. Meritz Securities' stock price increased by 11.4% after the November share acquisition announcement. On the other hand, KTB Investment & Securities (-14.9%) and Shin Young Securities (-6.3%) experienced declines despite the share acquisition announcements. Mirae Asset Securities also saw a 0.4% drop from 8,680 KRW at the time of the share repurchase announcement. However, compared to major competitors such as Samsung Securities (-8.2%), Korea Financial Group (-8.4%), and Kiwoom Securities (-8.5%) during the same period, the decline was relatively smaller.
There are criticisms that for a truly shareholder-friendly policy, the repurchased treasury shares should be canceled. If the repurchased shares are reintroduced to the market, the original purpose of enhancing shareholder value may be undermined. Some securities firms frequently resell repurchased shares instead of canceling them. Daishin Securities disclosed that it sold treasury shares worth 4.2 billion KRW the day before for employee performance bonuses. This is the second treasury share disposal for performance bonuses this year, following a 2.1 billion KRW sale in February. Shin Young Securities also disposed of treasury shares worth 300 million KRW in March for employee performance rewards.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
