South Korea: Hyundai’s record headquarters bid sends shares spiraling image

The automaker, the largest in the country, has agreed to pay a record $10 billion (6.1 billion pounds) to get a trophy property in Seoul’s high-end Gangnam district for its brand new headquarters.

The carmaker entered a bidding war with local electronics giant Samsung Electronics Co Ltd and prompted some investor concern about the way the company decides to spend its hard-earned cash.

Hyundai Motor and sister company Kia Motors saw their shares dipping 9 and 10 % respectively, after media reported the company winning the bid from seller Korea Electric Power.

“The bid price is nonsense. I was stunned,” said Kim Sung-soo, a fund manager at LS Asset Management and investor in Hyundai companies. “Even taking into account competition with Samsung, the bid price is excessive.”

“This deal is going to take a huge chunk out of Hyundai’s vault, and dipping their hands into a cash stash that could have otherwise been used for higher dividend payouts and R&D is going to aggravate many investors, especially foreigners,” comments Ko Tae-bong, auto analyst at HI Investment & Securities.

The deal will take a big chunk of Hyundai’s liquidities, with the Group’s ten listed companies (no financial units included) having 42.8 trillion won in cash at the end of the first quarter, according to figures from consulting firm CEO Score.

Via Reuters