IBK Investment Securities noted on the 8th that with the introduction of the revised capital markets law enforcement ordinance, it is necessary to pay attention to stocks in the Korea Value-Up Index that have a treasury stock ratio of 5% or more.
The revised enforcement ordinance that came into effect on Dec. 31 includes provisions such as ▲ restrictions on the allocation of new shares for treasury stocks during a spin-off ▲ disclosure of status and treatment plans if holding treasury stocks exceeds 5% ▲ disclosures related to the impact on trading partners and stock prices when disposing of treasury stocks.
Kwon Soon-ho, a researcher at IBK Investment Securities, said, “With this improvement in the system, shareholder demands may strengthen against corporations lacking plans for holding and disposing of treasury stocks,” adding, “Corporations that have already disclosed plans related to treasury stock purchases and retirements or have a treasury stock ownership of more than 5% among the stocks included in the Korea Value-Up Index have a greater incentive to retire their treasury stocks.”
Kwon noted that this would also align with the surge in activist campaigns demanding greater shareholder returns. The number of domestic corporations targeted by activist campaigns increased from 8 in 2019 to 77 in 2023, more than ninefold. Kwon stated, “With this year's implementation of the improvement in the treasury stock system, the issues of acquiring and retiring treasury stocks could become a new justification for activism.”
Kwon believes that if corporations voluntarily retire their treasury stocks or decide on retirement by accommodating shareholder requests, stock prices focusing on undervalued stocks could rise.
Kwon first selected corporations among those in the Korea Value-Up Index that have a treasury stock ratio of over 5% as interest corporations. In particular, companies with a market capitalization of over 2 trillion won that have not yet disclosed plans to enhance corporate value include Celltrion, Samsung Fire & Marine Insurance, DB Insurance, NCSoft, Korea Financial Group, JYP Entertainment, Hyundai Marine & Fire Insurance, and S1.
Although Kwon has not included some companies in the Korea Value-Up Index, he added those that may face increased demands for treasury stock retirements to the watch list, including NAVER, Samsung C&T, LS, Kumho Petrochemical, Hanwha, and CJ Logistics.