Many publicly traded companies that announced share buybacks experienced a surge in stock prices immediately after the announcement, but this upward trend largely dissipated by the end of the acquisition period. While over 60% of companies saw their stock prices rise a week after the announcement, that number dropped to about half by the end of the acquisition period. The average return also turned negative.
According to an analysis of data from the Korea Exchange on October 27, there were a total of 98 announcements of direct share buybacks by KOSPI and KOSDAQ listed companies from July 1 to October 26 this year, excluding acquisitions through trust agreements.
Among the 96 cases where stock prices were confirmed the day after the announcement, 64 cases (66.7%) saw an increase, with an average return of 3.59%. A week after the announcement, 58 out of 90 cases (64.4%) recorded gains, achieving an average return of 5.79%. This indicates that there were many instances of short-term stock price increases following the announcements.
However, the performance of companies whose acquisition periods ended showed a different picture. The average return for the 31 cases confirmed on the end date was just -0.24%. Gains were recorded in 16 cases (51.6%), while losses were seen in 15 cases (48.4%), effectively splitting the results in half. The average return for these companies a week after the announcement was 7.81%, but by the end of the acquisition period, it had dropped to -0.24%, a decline of 8.05 percentage points. The number of companies with gains also decreased from 19 to 16.
Notably, companies with significant stock price fluctuations stood out. SHD saw its stock price soar by 94.39% within a week of announcing its buyback on August 13, but by the end of the acquisition period on October 23, it had fallen by 47.53% compared to the announcement date. Similarly, KM Pharmaceutical rose by 22.53% a week after the announcement but dropped by 64.26% by the end of the acquisition period.
Large financial groups were not exempt from this trend. Shinhan Financial Group announced a share buyback worth 700 billion won on July 23, but by the end of the acquisition period on October 22, its stock price was down 13.01% compared to the announcement date. Hana Financial Group, which also had its acquisition period end on the same day with a buyback plan of 250 billion won, saw its stock price decline by 9.44%. Hanwha Engine rose by 8.62% the day after the announcement but fell by 10.57% by the end of the acquisition period.
Conversely, some companies maintained their upward momentum until the end of the acquisition period. Pungang increased by 42.96% compared to the announcement date, while Yukil C&S (26.27%), Jeongwon Nsys (25.93%), and Tobis (20.91%) also recorded double-digit increases.
Direct share buybacks are utilized as a means to bolster stock prices by creating demand for the company's shares in the market. However, the expectations following the announcement and long-term stock price increases appear to be separate issues.
* This article has been translated by AI.
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