Can Share Buybacks Support the Stock Price?

As usual, we begin with a question. Every figure below comes from actual market records.

Who are "other corporations"?

The Korea Exchange (KRX) reports trading by investor category: retail, foreign, institutional and "other corporations." The last is a Korea-specific reporting category for domestic non-financial companies. When a listed company buys back its own shares, those trades generally appear here. For why the biggest buyer is not necessarily the force setting the price, see Part 1.

AUG 19-OCT 21, 2026 - ACTUAL MARKET EVENTSTwo companies announce KRW 55tn in buybacks

On August 19, SK hynix's board approved open-market purchases of 24.07 million common shares, worth about KRW 40 trillion - around 3.3% of its issued shares. The company said the shares would all be cancelledCancellation permanently reduces the number of issued shares. Unlike shares held in treasury, those shares cannot be reissued.. Two days later, Samsung Electronics announced a KRW 15 trillion buyback for employee share-based compensation. Together, the two announced programs totalled KRW 55 trillion.

Both companies finished ahead of schedule. Samsung completed a program originally due on November 21 by October 6. SK hynix finished on October 21, nearly a month before its November 19 deadline. It spent its KRW 40.0043 trillion authorization to acquire 23,693,272 shares - 376,728 fewer than the originally planned 24.07 million, because the value limit was reached first. Between August 20 and September 10, other corporations recorded more than KRW 1 trillion in net purchases on the KOSPI on every trading day except September 3.

Completion of the buyback does not mean the SK hynix shares have already been cancelled. The company plans to cancel all of them, but cancellation is a subsequent step that must be confirmed through a separate filing. Completing a repurchase and completing a cancellation are not the same event.

And the share prices? The KOSPI reached 7,080.92 on September 23 during the repurchase period, then fell to 5,552.74 by October 20. It rebounded 3.29% to close at 5,735.66 on October 21. SK hynix had closed at KRW 1,662,000 the day before its board decision. On October 21, when the buyback ended, the stock rose 5.81% on the day to KRW 1,294,000 - still 22% below that pre-announcement close. Samsung's October 21 close of KRW 223,500 was also below its average repurchase price of KRW 263,823.

As the programs approached completion, press reports warned of a potential gap in buying demand: a buyer spending roughly KRW 1 trillion a day was about to leave the market.

If the company kept buying,
why did its share price fall?

A share buyback adds purchase orders to the market. For two months, the company bought stock that other investors were selling. But prices reflect the interaction of all buy and sell orders, not just one participant's activity. Even with an additional buyer, prices can fall if sellers are more aggressive. No one can know the counterfactual price path without the buyback.

Two different questions are being asked here. Does a buyback support the share price? That is a question about supply and demand while purchases are underway. Does a buyback benefit the shareholders who remain? That is a question about capital allocation - how much company cash is spent, and at what price. The first section dealt with market demand; the next works through shareholder value.

The first section asked whether buybacks support market prices. Here the question is whether continuing shareholders benefit. All else equal, repurchasing shares increases earnings per share (EPS). But does that automatically make each remaining share more valuable?

Treasury shares: stock a company owns in itself

Treasury shares (called treasury stock in US accounting) are shares a company has repurchased and still holds. While held in treasury, they carry neither voting rights nor dividend entitlements.

Buying below intrinsic value benefits holders

Suppose Company A spends KRW 10 billion on buybacks. At the assumed fair value of KRW 100,000 per share, it could buy and cancel 100,000 shares. The company would then be worth KRW 90 billion, with 900,000 shares remaining. Fair value would still be KRW 100,000 per share.

If a company buys below intrinsic value, it retires more shares with the same cash, increasing the theoretical value of each remaining share. Paying above intrinsic value does the reverse. The excess goes to the selling shareholders.

Here, KRW 100,000 per share is an assumed intrinsic value for the exercise - not the stock's quoted market price. In practice, a company's fair value cannot be known precisely. That makes it difficult to declare with certainty whether a real buyback took place at a bargain or at an excessive price. Try changing the price and spending amount below.

EPS may rise while intrinsic value per share falls

In the simulator, earnings per shareNet income divided by shares outstanding. Treasury shares are excluded from the denominator; reported EPS generally uses the weighted-average share count for the period. (EPS) rose at every repurchase price because net income stayed constant while the denominator shrank. Yet intrinsic value per share rose only when the company bought below value. Higher EPS did not automatically make continuing investors wealthier: the company had spent cash. In reality, lower net income or added interest expense could prevent EPS from rising even after a reduction in shares. We examined the relationship between EPS and share prices in Part 4.

For accounting purposes, a company's own treasury shares are excluded when calculating EPS. The effect therefore begins when the shares are bought, not when they are cancelled. Actual quarterly or annual EPS, however, uses time-weighted average shares outstanding. Shares repurchased in December affect that year's EPS less than shares repurchased in January.

After the buyback: hold or cancel?

Repurchased shares can follow two paths. Cancellation reduces the issued share count permanently. Shares kept in treasury can later be sold or granted to employees, returning them to circulation.

The cash leaves when the company buys the shares. Cancelling shares already held in treasury does not trigger the same cash payment a second time.

Buybacks and dividends distribute cash differently

Companies generally have two principal ways of returning cash to shareholders. Dividends pay cash to all eligible shareholders in proportion to their holdings. In a buyback, only investors who sell shares receive cash. Those who do not sell receive no immediate payout, but their ownership percentage can rise as shares outstanding decline. Both are forms of shareholder returnsDistributing capital to shareholders through dividends or share repurchases and cancellations..

South Korea's amended Commercial Act: a one-year cancellation rule

South Korea's amended Commercial Act took effect on March 6, 2026, upon promulgation. As a rule, newly acquired treasury shares must be cancelled within one year of acquisition. For shares already held before the law took effect, companies were granted a six-month grace period followed by a one-year cancellation window. The amendment restricts the long-standing practice of keeping treasury shares indefinitely for later use.

Samsung's KRW 15 trillion repurchase was intended for employee share-based compensation. That purpose may qualify for an exception to the cancellation requirement, but retaining and subsequently distributing the shares is still subject to the legally prescribed shareholder-approval process.

Buyback stories begin with a regulatory filing. Two companies may both announce "share repurchases" while describing very different purposes and terms. Let's compare the filings issued two days apart.

Four things to check in a buyback filing