"1Q Treasury Stock Cancellation Up 86%... Must Examine Purpose: Shareholder Returns vs Growth"

This year, major companies have been consecutively canceling their treasury shares, recording a total of 10 trillion KRW in the first quarter alone. If the current trend continues, it is expected to reach around 20 trillion KRW annually. Investors are advised to adopt a differentiated approach based on the purpose of treasury share holdings.

On the 3rd, Kwon Soon-ho, a researcher at IBK Investment & Securities, stated in the report titled "Purpose of Treasury Share Holdings: Shareholder Returns vs Growth," "The increase in treasury share cancellations in the first quarter continues. It has increased by 86% compared to the same period last year, reaching 10 trillion KRW." Specifically, the financial sector accounts for 3.1 trillion KRW, representing 31% of the total cancellations. This is followed by industrial goods (1.3 trillion KRW, 20%) and consumer discretionary (750 billion KRW, 8%).

Researcher Kwon predicted, "If the trend where the first quarter cancellations account for 40% of the annual total continues, the annual treasury share cancellation amount in 2025 is expected to reach approximately 20 trillion KRW."

He also pointed out, "Although the trend of increasing treasury share cancellations is expanding, if the stated purpose of holding treasury shares is not shareholder returns, companies should prioritize growth potential over returns through treasury shares."

Among companies subject to mandatory disclosure of treasury share holdings, 10 companies, accounting for 9%, have stated that their purpose is not shareholder returns. These companies explained that they hold treasury shares due to obligations arising from stock purchase rights or for purposes such as corporate growth and strengthening management control. Samsung Fire & Marine Insurance disclosed treasury share holdings for securing future growth engines through new business ventures, while NAVER and Hanwha disclosed treasury share holdings for employee stock compensation purposes.

Among 94 companies that stated they hold treasury shares for shareholder return purposes, 35 companies have plans for purchase, cancellation, or disposal. Researcher Kwon evaluated, "Compared to companies that simply state shareholder returns as their purpose, companies that disclose plans related to treasury shares are judged to have a stronger commitment to shareholder returns." Based on first-quarter disclosures, he cited Celltrion, Samsung C&T, Krafton, Doosan, Hugel, Kumho Petrochemical, and KCC as representative companies.