SK Hynix will execute a $40 billion stock buyback and retirement ahead of schedule, leveraging its record cash flow. This decision comes as the company responds swiftly to shareholder demands amid ongoing labor disputes over bonus payments.
The company has also expanded its shareholder return policy from the previous limit of 50% of cumulative free cash flow (FCF) to over 50%. Samsung Electronics is expected to announce additional shareholder return policies as early as this month.
On August 19, SK Hynix's board of directors approved the stock buyback and retirement plan. The buyback period will begin on August 20 and last for approximately three months. Based on the closing price of 1,662,000 won per share the day before the board's resolution, the buyback will involve about 24.07 million shares, representing 3.3% of the total issued shares. All acquired shares will be retired.
This decision accelerates the timeline for shareholder returns, which were initially planned for 2024, based on 50% of the cumulative FCF from 2025 to 2027. The company had previously indicated that it would consider additional returns if FCF significantly increased before the end of the policy period.
With a substantial improvement in cash generation, the conditions for early execution have been established. SK Hynix continues to achieve record results, driven by growing demand for artificial intelligence (AI) memory. As of the end of the second quarter, the company's net cash stood at approximately 69 trillion won. The company believes that its stock price does not adequately reflect its intrinsic value compared to its business competitiveness and cash generation capabilities.
This decision also addresses recent shareholder demands for increased returns. During the last regular shareholders' meeting, concerns were raised regarding corporate value enhancement and shareholder returns, particularly as profits have surged due to the AI memory boom.
Notably, the announcement of a large-scale shareholder return comes amid ongoing labor disputes. SK Hynix's labor and management have been at odds over the bonus payment method, but they entered a provisional agreement process after negotiations concluded early on August 19. While shareholder returns and employee compensation are separate issues, the company faced pressure from both internal and external stakeholders regarding performance distribution in light of improved results.
SK Hynix plans to implement both the stock buyback and cash dividends. In addition to regular dividends, the company is considering an increase in dividends, including special dividends. Specific details regarding the scale and method will be announced during the third-quarter earnings report.
The $40 billion stock buyback and retirement is the largest of its kind among publicly listed companies in South Korea. SK Hynix also stated that it is on track to achieve its financial soundness goals. By raising the shareholder return to over 50% of FCF, the company aims to accelerate the return of cash reserves to shareholders in line with improved performance.
SK Hynix stated, "We plan to pursue additional shareholder returns through a combination of stock buybacks and dividends, considering cash flow, market conditions, and distributable profits during the policy period. Specific details will be announced following board resolutions during the third-quarter earnings report."
Meanwhile, Samsung Electronics is currently operating a shareholder return policy for 2024-2026. The market anticipates that Samsung will also reflect its increased cash generation from the AI memory boom and may unveil its next three-year shareholder return policy as early as this month, with estimates ranging from 100 trillion to 200 trillion won.
* This article has been translated by AI.
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