The largest South Korean automaker and its affiliate unveiled the fact they opted for new share buybacks, with a combined value of 670 billion won ($615 million).
Hyundai Motor and Kia Motors have opted to reveal the share buybacks in what looks like a strategy to satisfy angered investors – they were thoroughly disgruntled recently after the South Korean chaebol decided (with the board of management not even briefed on the price) to purchase a prized plot in Seoul to build their new headquarters.
This is the first such move –specifically targeting an enhancement of shareholder value – coming from Hyundai in almost ten years and the first ever for the younger affiliate Kia. It also follows last month’s announcements that the companies have decided for the first time ever to consider introducing interim dividends. This is also a move that could reflect upon other Korean conglomerates, as the companies traded in Seoul are usually listed with discounted stocks because of small dividends, investor worries about corporate governance and less positive prospects.
After the announcement the stock for the automaker rose 5.7% – but the basis has been very low ever since the companies (Hyundai Motor, Hyundai Mobis and Kia Motors) revealed they would acquire the land. With a bid of $10 billion for the Seoul plot based in the high-end Gangnam district – considered to be a purchase at more than three times the actual value – the shares lost almost a fifth of their value.