SK Hynix announced plans to repurchase and cancel treasury shares worth KRW 40 trillion (approximately USD 28.6 billion), committing to allocate at least 50% of the free cash flow generated between 2025 and 2027 to shareholder returns. Following the announcement, SK Hynix’s U.S.-listed shares rose more than 4% in after-hours trading, reversing earlier losses of over 3%.
The dividends from the AI storage supercycle are being realized at an accelerated pace, $SK hynix (SKHY.US)$ unveiling the largest shareholder return program in its history.
On Wednesday, SK Hynix announced it would repurchase and cancel treasury shares worth KRW 40 trillion (approximately USD 28.6 billion) and committed to directing at least 50% of the free cash flow generated from 2025 to 2027 toward shareholder returns. The company also stated it would continue to pursue additional share buybacks and cancellations, with further details on shareholder returns to be disclosed alongside its third-quarter earnings results.
Following the announcement, SK Hynix’s U.S.-listed shares surged more than 4% in after-hours trading, recovering from a previous drop of over 3%. Its Korean-listed shares also erased an 8.3% decline in post-market trading. As demand for AI chips supports a price recovery cycle for memory products, albeit with slowing momentum, this large-scale shareholder return plan provides new value support for investors and further reinforces market confidence in the stock’s price floor following peak profitability.
Buyback Details: Aimed at Cancellation, Not Mere Price Support
According to documents filed by SK Hynix with regulators, the company will repurchase up to 24 million treasury shares between August 20 and November 19. The stated purpose of the buyback is explicitly for share cancellation, rather than for market capitalization management or employee incentives.
As reported by Bloomberg, the KRW 40 trillion buyback constitutes a core component of the company’s shareholder return framework for 2025–2027. The company has pledged to return at least 50% of its cumulative free cash flow over the three-year period to shareholders through dividends, buybacks, and cancellations. Additionally, the annual fixed dividend has been increased from KRW 1,200 per share to KRW 1,500 per share.
SK Hynix’s ability to launch a return package of this magnitude is directly underpinned by its rapidly growing cash reserves. In the second quarter, the company recorded revenue of KRW 79.3 trillion and operating profit of KRW 60.5 trillion, both historical records. By the end of the second quarter, cash and cash equivalents rose to KRW 88 trillion, a quarter-on-quarter increase of KRW 33.6 trillion, while borrowings decreased to KRW 18.6 trillion, expanding net cash to KRW 69.4 trillion.
Meanwhile, SK Hynix recently raised approximately KRW 39.9 trillion through the issuance of new ADRs on Nasdaq. These funds will be prioritized for capacity expansion projects, including the Yongin wafer fab, advanced packaging facilities in Cheongju, and EUV equipment. However, sustained growth in operating cash flow continues to provide ample room for shareholder returns.
Expectations for share buybacks have been building for some time, and Samsung may follow suit simultaneously.
This announcement was not entirely unexpected by the market.According to Wallstreetcn on August 12,the combined shareholder return of Samsung Electronics and SK Hynix could exceed 200 trillion Korean won (approximately USD 141.2 billion), potentially setting a new historical record, with plans to be announced as early as the end of August. At that time, buoyed by these expectations and news that Temasek, Singapore's sovereign wealth fund, planned to make its first direct equity investments in both companies using its own capital, the shares of both companies rose by approximately 6% on the day, driving the Korea Composite Stock Price Index (KOSPI) above the 6,500-point mark.
The market had previously estimated that, in extreme scenarios, SK Hynix's shareholder returns could approach 100 trillion Korean won. The current announcement of a 40 trillion Korean won buyback represents a phased realization of this framework, and further disclosures during the third-quarter earnings release remain worthy of attention.
Bloomberg analysis points out that as the rate of increase in memory chip prices begins to slow, the logic of relying solely on earnings growth to drive valuations faces challenges. Share buybacks and cancellations directly reduce the number of outstanding shares, thereby increasing earnings per share and net asset value per share; furthermore, large-scale cash returns lower holding costs, helping to establish bottom-line support for stock prices during the transition period as investors gradually digest peak growth expectations.
Editor/lambor