Yuhan(000100) decided to cancel all of its treasury shares worth about 425.3 billion won, drawing market attention. The company said it was "a decision to enhance shareholder value," but industry watchers say it is a strategic move that goes beyond simple shareholder returns to include responding to the government's Commercial Act revision and managing management uncertainty ahead of the appointment of the next chief executive officer (CEO).
On the 23rd, the board of directors met and decided to cancel all 6.06 million treasury shares held by the company. The shares to be canceled are 6,031,820 common shares and 32,600 preferred shares, totaling about 425.3 billion won. That equals 7.6% of the total common shares outstanding and 2.8% of the preferred shares, and represents all treasury shares the company held. The cancellation amount was calculated based on the closing prices on the day before the board resolution: 70,200 won for common shares and 58,400 won for preferred shares.
◇ Preemptive response to the third Commercial Act revision… beyond shareholder returns to a stock price boost
Yuhan cited "enhancing shareholder value" as the reason for the move. Canceling treasury shares is a representative shareholder-return policy that reduces the number of shares in circulation and raises existing shareholders' equity value. If a company continues to hold treasury shares, there remains concern about an overhang (potential selling volume) due to possible resale in the future, but once they are canceled, the shares disappear permanently and the move is seen as a stronger form of returning value to shareholders.
Another backdrop drawing attention in the industry is the third Commercial Act amendment passed by the National Assembly in March. The amendment requires, in principle, that treasury shares acquired be canceled within one year, and that treasury shares acquired before the law takes effect also be disposed of or canceled within a certain grace period.
Accordingly, the industry views Yuhan as having maximized the shareholder-return effect by clearing out, in advance, existing treasury shares that are slated for cancellation. The thinking is that if the shares must be canceled anyway, it is better to send a clear shareholder-return message to the market.
Yuhan has already been steadily increasing its treasury share cancellations. It announced a plan to cancel 802,090 shares, equal to 1% of shares issued in 2024, by 2027, and canceled 240,627 shares (about 36.2 billion won) in May last year and 320,836 shares (about 25.3 billion won) in January this year. This time, by canceling all treasury shares held, the company is seen as having made its shareholder-return commitment clearer in line with the Commercial Act's revised direction.
The market reacted immediately. Yuhan's stock closed at 74,900 won on the 24th, the day after the announcement of the full cancellation of treasury shares, up about 5% from the previous trading day.
Some analysts say the decision also reflects an intent to reverse a recently weak share-price trend and ease shareholder dissatisfaction. Yuhan commercialized "Leclaza," a lung cancer therapy that became the first domestically developed anticancer drug to win U.S. Food and Drug Administration (FDA) approval, but the share price remains below the level at the time of Leclaza's approval in Aug. 2024. So far this year, the stock has fallen more than 30%, a steeper drop than major pharmaceutical peers such as Hanmi Pharmaceutical(128940) and Chong Kun Dang pharmaceutical(185750), and GC녹십자.
Industry watchers say that amid growing shareholder disappointment, the large-scale cancellation of treasury shares sent a positive signal to the market by making clear the intent to support the stock price.
◇ Delay in appointing the next CEO… easing the burden on new management and reducing market uncertainty
Another viewing point is the timing of the cancellation.
Yuhan is currently working to appoint its next representative director. Representative Director Cho Uk-je's term runs until Mar. 2027, but unlike in the past, the succession lineup has been slow to take shape.
When Board Chair Lee Jeong-hee and Representative Director Cho were each appointed as representative directors, the shortlist was effectively set by June–July of the previous year. This time, however, even with about eight months left in the term, the final candidate list has not been narrowed. The industry generally expects the outline of the next representative to emerge around September, after the usual vacation season in the pharmaceutical sector.
In this context, the full cancellation of treasury shares is widely interpreted as a move aimed at reassuring shareholders unsettled by uncertainty surrounding the next appointment and at bolstering market confidence. By first presenting shareholder-friendly policies to stabilize the market and preemptively shedding burdens tied to the Commercial Act revision, the company has created conditions for the new leadership to launch more stably.
An industry official said, "If these were treasury shares that would have to be canceled anyway, clearing them all at once now is the most effective choice," adding, "It is a decision that simultaneously achieves multiple effects—strengthening shareholder returns, preemptively responding to the Commercial Act revision, and easing the burden on the next management." The official added, "It is meaningful that Yuhan, the No. 1 company in the pharmaceutical sector, has set the direction first."
◇ Internal promotion or external recruitment… a more complex succession picture
In fact, the biggest focus tied to the timing of the cancellation is the appointment of the next representative. The industry sees the delayed appointment compared with previous years and the direction of the next management system as a possible additional factor behind this decision.
A more complex candidate field than in the past is cited as a reason for the delay. Internal promotion used to be the likely scenario, but this time external recruits have joined the race, making the succession picture even more complicated.
A leading candidate is President Kim Yeol-hong, head of the R&D division. Since being recruited externally in 2023, Kim has overseen research and development and has been mentioned as a candidate for the next representative. If Kim becomes representative, he would be Yuhan's first CEO hired from outside.
However, as it has been less than four years since joining the company, some concerns have been raised about his command over the internal organization and leadership. On the other hand, his presence is said to have grown as his role reportedly carried significant weight at a recent executive workshop.
Kim's active purchases of company shares also draw attention. He has consistently bought company stock since joining and remained the most active buyer this year. His holdings increased from 6,439 shares in October last year to 7,739 shares after additional purchases in January, March, and April this year.
By contrast, the shareholdings of internal candidates also mentioned in the pool—Vice President Lee Byeong-man of the Management Support Division and Vice President Yu Jae-cheon of the Pharmaceutical Business Division—stand at 3,232 shares and 1,548 shares, respectively. Their additional purchases this year were limited to 300 and 500 shares, respectively.
With competition continuing between Kim and the internal candidates, the industry is also considering the possibility of a co-representative, or joint-CEO, structure.