The Zhitong Finance App learned that South Korean storage giant SK Hynix (SKHY.US) said on Wednesday that the company will repurchase and cancel shares worth 40 trillion won (US$28.61 billion) and plans to use at least 50% of the accumulated free cash flow for shareholder returns by next year. The company believes that the current stock price does not fully reflect the company's value, so it has decided to fully launch a shareholder return plan. As of press release, SK Hynix's US stock rose more than 4% at night.
According to reports, SK Hynix held a board meeting on Wednesday. Based on the closing price of 1,662,000 won per share the day before the board meeting, the 40 trillion won shares repurchased and cancelled correspond to approximately 24.07 million shares, accounting for 3.3% of the company's total issued shares.
SK Hynix said that the share repurchase will begin on August 20 and last for about three months. After the repurchase is completed, all purchased shares will be cancelled. This 40 trillion won share repurchase and cancellation plan is the largest similar transaction in the history of a Korean listed company.
Furthermore, SK Hynix clearly stated that it will increase the shareholder return scale from the previous “within 50% of cumulative free cash flow” to “more than 50%.” Shareholder return methods will include a combination of share repurchases and cash dividends. The company also plans to expand dividend policies, including fixed dividends and special dividends.
Earlier, in November 2024, SK Hynix announced that it would return 50% of the accumulated free cash flow to shareholders during the three-year period from 2025 to 2027, and stated that if performance improvements drive a significant increase in free cash flow, the company will consider early shareholder returns.
It is worth mentioning that earlier this month, SK Hynix announced that it would pay out a dividend of 375 won per share and said it is actively evaluating measures to further enhance shareholder value. Details will be finalized and announced in the third quarter.
SK Hynix said, “During the implementation of the policy, we will comprehensively consider cash flow, market conditions, and distributable profits to further enhance shareholder returns through a combination of stock repurchases and dividends.” The company also added: “The specific scale and method of return will be announced in the third quarter results report after approval by the board of directors.”
Etoro analyst Josh Gilbert said, “The scale of SK Hynix's share buyback is a strong sign that investors have always wanted to use their growing cash reserves to increase shareholder returns.”