2 weeks ago
SK Hynix announces $29 billion buyback as ADRs jump
SK Hynix makes memory chips that are used in artificial-intelligence equipment.
The company said it will spend about $29 billion buying back its own shares.
It will then cancel those shares, leaving fewer shares in circulation.
This can increase the ownership percentage and earnings per share of investors who keep their shares.
SK Hynix also promised to return more than half of its free cash flow from 2025 through 2027 to shareholders.
Investors had been asking the company to share more of its record profits.
The company’s US-traded shares rose before the market opened, but its South Korean shares fell.
The mixed trading came as investors questioned whether the AI boom and SK Hynix’s high valuation can continue.
SK Hynix plans to buy back and cancel up to 24 million treasury shares worth 40 trillion won, or about $29 billion.
The buyback is scheduled to run from 20 August through 19 November and will permanently reduce outstanding shares.
The company will allocate more than 50% of free cash flow generated from 2025 to 2027 to shareholder returns.
SK Hynix’s US-listed ADRs rose 6% in premarket trading after falling 9.2% the previous day.
The company’s South Korean shares fell 9.75% in Seoul, amid concerns about AI spending, valuations and semiconductor demand.
- Who
- SK Hynix Inc., its shareholders and investors in its US-listed ADRs and South Korean shares.
- What
- SK Hynix announced a plan to buy back and cancel up to 24 million treasury shares and increase its shareholder-return commitment.
- Where
- The ADRs traded in US premarket markets, while the company’s primary listing traded in Seoul, South Korea.
- When
- The announcement was made on Wednesday, 19 August; the buyback is planned for 20 August through 19 November, with the broader cash-flow policy covering 2025 to 2027.
- Why
- The plan responds to investor pressure for larger payouts after strong AI-related profits and growing concerns about the durability of AI spending and elevated valuations.
Shareholder Payout Supporters
Valuation and AI-Spending Concerns
Use of excess cash
Shareholder Payout Supporters
Investors have urged SK Hynix and Samsung Electronics to return a larger share of excess cash through dividends or buybacks after record profits.
Valuation and AI-Spending Concerns
Investors have become more concerned about whether AI hardware spending can remain durable, increasing scrutiny of how much cash should be committed to returns.
Effect of the buyback
Shareholder Payout Supporters
Buying back and canceling shares reduces the total share count and can increase earnings per share and existing shareholders’ proportional ownership.
Valuation and AI-Spending Concerns
The announcement followed a sharp decline in the company’s shares and broader technology-market volatility, highlighting doubts about whether the stock’s rapid rise reflected underlying fundamentals.
US listing strategy
Shareholder Payout Supporters
The US listing expands access to overseas investors and provides a pool of investors trading ADRs that carried about a 40% premium to the Korean shares at the cited market close.
Valuation and AI-Spending Concerns
The company’s ADRs and Korean shares showed sharply different trading reactions, while investors continued to question the sustainability of the AI-driven rally.
Key facts
- Buyback value
- 40 trillion won, approximately $29 billion
- Shares affected
- Up to 24 million treasury shares
- Buyback period
- 20 August to 19 November
- Shareholder-return target
- More than 50% of cumulative free cash flow generated from 2025 through 2027
- US ADR reaction
- Rose 6% in premarket trading on Wednesday after falling 9.2% on Tuesday
- South Korean listing reaction
- Fell 9.75% in Seoul trading on Wednesday
- Recent share performance
- The stock had fallen more than 50% from its June record high, after rising 807% over two years through June on the KOSPI
Sources
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