Nearly half of the companies that announced treasury stock acquisitions or disposals saw their share prices fall within a month, data showed. Market analysts say that even when treasury stock policies are perceived as positive catalysts, they rarely translate into sustained share price gains without genuine improvements in corporate fundamentals.
A total of 160 listed companies filed plans to acquire or dispose of treasury shares this year as of June 2, according to the Korea Exchange (KRX). Among them, 64 companies — 40% of the total — saw their share prices decline the day after the disclosure. On a one-week basis, 64 out of 154 companies (41.5%) posted declines, and after one month, 50 out of 110 (45%) saw their stock prices fall. The proportion of share price declines grew larger as more time elapsed after the announcements.
Raon Robotics, a KOSDAQ-listed company, recorded the steepest drop, with its share price plunging 31.17% in the month following its treasury stock cancellation announcement. Bridgetec (-28.95%) and Hyundai Pharmaceutical (-28.42%) also posted sharp declines.
A closer look at individual cases shows that share price movements depend more on the substance of treasury stock policies than their form. Raon Robotics announced treasury stock cancellation as part of its shareholder return program, but failed to meet investor expectations as uncertainties over actual earnings improvement and global business expansion remained unresolved. Hyundai Pharmaceutical's decline is attributed to its disposal of most of its treasury shares through a cross-exchange arrangement with another pharmaceutical company.
The picture is not much different when isolating treasury stock acquisitions alone. Of the 75 companies that announced treasury stock acquisitions this year, 28 (37.3%) saw their share prices decline within a month. Studio Dragon, for example, fell 18.86% over the same period, demonstrating the limited impact of its acquisition announcement.
The third revision of the Commercial Act, which mandates treasury stock cancellation, has taken effect, expanding disclosure requirements for treasury stock holding and disposal plans to all listed companies. The revised act requires, in principle, that companies cancel treasury shares within one year of acquisition. In exceptional cases — such as employee compensation or management purposes — companies must draft treasury stock holding and disposal plans and obtain approval at the general shareholders' meeting.
"Since the third Commercial Act revision was first applied, corporate responses have split into two camps: those seizing it as an opportunity to rebuild trust with shareholders and those trying to minimize the regulation's impact," said Park Se-yeon, a researcher at Hanwha Investment & Securities. "From an investor's perspective, it is necessary to distinguish between companies that have cleanly canceled their treasury shares and those that have left broad exceptions as 'options.'"