South Korea’s auto giant Hyundai Motor Co. will buy back shares worth 250 billion won ($222.7 million) in hopes to boost its stock performing at its worst in nearly a decade amid deteriorating sales and prospects.
Hyundai Motor announced in a regulatory filing on Friday that it will buy 2,136,681 common shares worth 213.7 billion won and 41.2 billion won worth of preferred stocks based at the closing prices on Nov. 29. The share repurchase, aimed to enhance shareholder returns, will be made in the market from Dec.3 to Feb.28 in 2019, the company added.
Investors have been grumbling about the car maker’s sluggish stock performance weighed down by multiple whammies of flagging sales at home and abroad, pressure for restructuring and credit rating downgrade by S&P. After a large-scale net selling by institutional investors this month, shares of Hyundai Motor plummeted to 97,500 won on Nov.20, falling below 100,000 won for the first time since Nov. 30, 2009 when the stock touched 99,000 won.
The buyback plan lifted Hyundai Motor shares 7 percent on Friday to 107,000 won.
Experts remain skeptical about whether the share buyback is enough to restore the sagging share prices. Investor sentiment for the overall auto industry has been chilled recently after U.S. President Donald Trump reiterated the need of imposing a 25 percent tariff on imported cars. To make matters worse, Hyundai Motor delivered the poorest-ever profit of 289 billion won in the third quarter, down by a whopping 70 percent on quarter and 76 percent on year. Its sister company Kia Motors Corp. also posted equally dismal results of a 67 percent on quarter plunge in operating profit during the same period.
Hyundai Motor Group is also struggling to find ways to overhaul its ownership structure amid the Korean government’s toughened regulations on intra-group transactions by large business groups.
It had come up with a plan to spin off Hyundai Mobis’ module and after-sales service business and merge them with Hyundai Glovis, but shelved the plan in May in the face of an opposition rally spearheaded by U.S. activist fund Elliott. The fund claimed the merger ratio between the two firms undervalued Mobis shares and hurt shareholders. The decision posed a major setback for Korea’s second-largest conglomerate in its efforts to ensure a smooth transfer of power from the 80-year-old father to his son, Vice Chairman Chung Eui-sun.
Earlier this month, Elliott also demanded that the group use its excess capital to bolster shareholders’ value and rationalize operations through streamlining non-core assets.
By Moon Il-ho and Choi Mira
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