SK hynix (000660.KS) cannot announce specific shareholder return measures until the 4th of next month due to the impact of its American Depositary Receipt (ADR) listing in the United States, it has been confirmed. With strong demand for a "restoration" of shareholder value following the recent sharp drop in its share price, there are expectations that the company could announce shareholder returns even larger than initially anticipated. However, even accounting for the legal constraints, observers continue to point out that a concrete communication strategy meeting "global standards" is needed, given that a disappointing conference call triggered the plunge in the share price.
According to the financial investment industry on the 30th, listed companies conducting a new share offering on the US stock market are subject to a prospectus delivery requirement for 25 days from the trading start date, including weekends. If a company discloses material information during this period—such as large-scale share buybacks or special dividends not included in the prospectus at the time of listing—it faces the possibility of a class-action lawsuit under US securities law. For this reason, brokerages participating in the offering are also unable to provide analyst reports. SK hynix's ADR was listed on July 10 US time, so the 25-day period ends on the night of August 4 Korea time. At the conference call held after its earnings announcement the previous day, SK hynix drew criticism for offering only the general stance that it was "reviewing various methods" regarding shareholder returns. Due to structural constraints, there were limits to disclosing new shareholder return methods at the earnings announcement.
Even accounting for this, however, many point out that it is hard to avoid criticism that the opaque communication method amplified market fear. Rival Micron presented long-term contract volumes and advance payments in specific figures at its recent earnings announcement. Kim Kyu-sik, former chairman of the Korea Corporate Governance Forum, said, "The share price, which had risen as much as 6% during the conference call, began to plunge right after the comment that nothing had been decided on shareholder returns," adding, "The reason SK hynix's value is lower than Micron's lies not in earnings but in attitude."
With shareholder losses large amid the recent sharp price drop, some observe that demands for shareholder returns could intensify further starting on the 5th, when the legal shackles are lifted. Many voices expect concrete measures by the end of October at the latest, when third-quarter earnings are announced. Kim Sun-woo, a research fellow at Meritz Securities, said, "It is now time for a 'restoration' of shareholder value, not an 'enhancement,' to be demanded and to follow," adding, "In accounting terms, shareholder returns are not an expense."
On this day, SK hynix closed at 1,322,000 won, down 5.64% from the previous day. It has fallen 50.11% over the past month, cutting its value in half. The ADR also declined, but the premium remains high at 37.8%. While some analyses suggest that the cheaper share price is passing through a bottom, most target prices have been lowered, reflecting frozen investor sentiment. Of the 16 domestic brokerages that issued reports on this day, eight lowered their target prices. Two raised them. The average target price is 3.22 million won.
