The number of treasury stock cancellation filings has surpassed disposal filings over the roughly three months since the passage of the third Commercial Act amendment, which mandates the cancellation of treasury shares.
Analysts say the trend reflects a clear shift away from the previous practice of using treasury shares to expand friendly stakes or as exchange instruments, with companies now opting for cancellation. The market is interpreting this as a signal of corporate value reassessment and the easing of the so-called "Korea Discount."
According to the Korea Exchange's disclosure system KIND on the 19th, a total of 154 treasury stock cancellation decisions were filed between March and the same date, following the passage of the third Commercial Act amendment on February 25. Treasury stock disposal decisions during the same period totaled just 111. Cancellation filings outnumbered disposal filings.
This marks a sharp departure from last year's pattern. In 2024, treasury stock disposal decisions outnumbered cancellation decisions in most months. In December alone, disposal filings surged to 137 as companies rushed to dispose of treasury shares before the amendment took effect, while cancellation filings during the same month stood at just 33 — less than a quarter of disposals.
The trend shifted rapidly this year. In January, just before the third Commercial Act amendment passed, disposals stood at 74 and cancellations at 21, with disposals still in the lead. In February, when the amendment passed, disposals totaled 88 and cancellations 76, narrowing the gap significantly. From March, cancellation filings began to overtake disposal filings in earnest. In March alone, treasury stock cancellation decisions reached 91, surpassing the 54 disposal decisions and reversing the trend.
Analysts say the impact of the Commercial Act revision is now in full swing. Under the amendment, companies must cancel or dispose of not only newly acquired treasury shares but also existing holdings within 18 months. By the second half of this year through early next year at the latest, a significant number of companies will need to determine the direction of their treasury stock handling.
This year, Samsung Electronics (005930.KS) announced treasury stock cancellation plans worth 14.8994 trillion won, and SK hynix (000660.KS) announced plans worth 12.24 trillion won. SK and Samsung C&T (028260.KS) also unveiled plans to cancel all of their treasury shares — worth 4.8343 trillion won and 2.3269 trillion won, respectively — setting a benchmark for the market. Companies that have not yet announced specific treasury stock plans will also need to decide on cancellation or disposal. The market expects treasury stock cancellation filings to increase in a "push-through" fashion as the second half of the year approaches.
The expanding trend of treasury stock cancellations is also expected to serve as a favorable factor for the KOSPI in the medium to long term, amid recent heightened volatility. If the narrowing of individual company discount rates from cancellations combines with improved supply conditions, expectations for a broader KOSPI re-rating could grow further.
Treasury stock cancellation reduces the number of outstanding shares, boosting earnings per share (EPS) and per-share value. At the same time, it is viewed positively for blocking the so-called "treasury stock magic" — the practice of using treasury shares to expand controlling shareholders' friendly stakes or in corporate merger processes.
The brokerage industry is indeed reassessing the valuations of companies that have announced treasury stock cancellations. SK Securities set a target price of 33,000 won for Lotte Holdings (004990.KS), which announced a treasury stock cancellation worth 166.3 billion won — 20.4% above the current share price. Park Se-yeon, a researcher at Hanwha Investment & Securities, said, "Reassessment will take place over the medium to long term, premised on treasury stock reduction and improved corporate governance."
