'Divorce Theme' SK Inc. Experiences Sharp Fluctuations
Investment Industry Focuses on Business Portfolio Restructuring
Increased Expectations for Additional Shareholder Returns Including Share Buybacks
Following the appellate court ruling in the divorce lawsuit between Chey Tae-won, chairman of SK Group, and Noh So-young, director of Art Center Nabi, volatility in SK Inc.'s stock price has increased amid concerns over a potential management rights dispute. Amid the proliferation of various thematic stocks, market attention is focused on whether SK Inc., which has emerged as a 'divorce theme' stock, can break free from its perennial undervaluation through this opportunity.
According to the Korea Exchange on the 11th, SK Inc. closed at 188,600 KRW on the 10th, up 3.63% from the previous trading day. On the day of the appellate court ruling on the 30th of last month, the stock surged 9.26% in a single day, marking three consecutive days of gains, but then fell 8.28% over the next two trading days, showing significant volatility. Over the past seven trading days, individual and foreign investors net sold 8.2 billion KRW and 147.9 billion KRW respectively, while institutions net bought 147.1 billion KRW, driving the short-term surge.
The reason for such rapid price fluctuations in a short period is interpreted as growing expectations that Chairman Chey will expand SK Inc.'s dividends to raise a large amount of cash. Additionally, prospects of a management rights battle over group shares and potential sales of some businesses have also influenced the market.
Will Business Restructuring and Shareholder Returns Resolve Undervaluation?
The industry expects SK Inc. to accelerate business restructuring to raise funds until the Supreme Court ruling is issued. SK Inc. has continued quantitative investments focusing on advanced materials, bio, and digital sectors. However, some critics have continuously pointed out that excessive investment expansion is unduly increasing corporate debt and not leading to enhanced shareholder value.
In the securities industry, it is anticipated that SK Inc. may secure financial soundness through business restructuring while also implementing additional shareholder return policies. Kwon Soon Choi, a researcher at SK Securities, said, "Recently, SK Inc. is reviewing its corporate portfolio restructuring," adding, "Bold exits (investment recoveries) may be carried out in business sectors with low synergy potential within the group or those that have achieved targeted results." He further analyzed, "With funds raised from some business sales and tax support related to the government's value-up program, enhanced shareholder return policies are expected," and "there is potential for stock price increases in the second half of this year."
SK Inc.'s shareholder return stance is positive. On the 30th of last month, the board of directors resolved to cancel all 695,626 treasury shares purchased last year. Based on the purchase price, this amounts to approximately 119.8 billion KRW, about 1% of the market capitalization. Lee Sang-heon, a researcher at Hi Investment & Securities, said, "The core of the recent government value-up policy and treasury stock system improvement is to eradicate major shareholders' private interests and improve governance, and this intention will lead to corporate high dividend policies and treasury stock cancellations," adding, "Although treasury stock cancellation is not mandatory, considering the sustainability of the policy, some cancellation of the approximately 25% treasury stock held by SK Inc. can be expected." He continued, "Recently, some sales of investment stakes are being pursued, which can lay the foundation for enhancing shareholder value," and "expanding shareholder returns will ultimately lead to valuation increases."
Voices are growing across the financial investment industry that SK Inc. needs to expand the scale of treasury stock cancellations to escape the slump in its stock price. Nam-woo Lee, chairman of the Korea Corporate Governance Forum, pointed out, "As a representative holding company in Korea, SK Inc. needs to make shareholder-centric decisions such as treasury stock cancellations to achieve true value-up," adding, "Due to treasury shares amounting to 25% of issued shares, the stock is continuously traded at a discount." He emphasized, "SK Inc.'s shareholder return policy explicitly aims to maximize shareholder value based on treasury stock purchases and cancellations," and "since treasury shares involve company cash, they should be canceled for all shareholders rather than used to defend the management rights of specific shareholders."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
