When South Korea’s SK Hynix announced a ₩40 trillion (approximately $28.9 billion) share buyback and cancellation plan, The Wall Street Journal (WSJ) took note, calling it an unusual decision that contrasts with the practices of U.S. companies. On the surface, the paper described it as a “head-scratcher,” but the assessment is best read as an ironic acknowledgment that SK Hynix actually executed the fundamental principles of share buybacks by the book.
Buying back shares when the stock is undervalued is generally considered the textbook approach. WSJ paid particular attention to the timing of this decision. SK Hynix’s stock had been declining since hitting an all-time high in June, and on the 19th—the day before the buyback announcement—it plunged 9.8% in a single session. The company unveiled its buyback plan after market close. On the news, SK Hynix’s American Depositary Receipts (ADRs) rose more than 5% in U.S. pre-market trading on the 20th, and the stock surged more than 11% intraday after the Seoul market opened.
WSJ pointed out that despite the recent pullback, SK Hynix shares were still up 470% from a year earlier. Just last month, the company raised over $2.6 billion (approximately ₩3.6 trillion) by issuing ADRs to U.S. investors at a price 50% higher than current levels. In other words, it sold when the stock was expensive and is now buying it back at a cheaper price.
WSJ took a jab at its own country’s corporations, noting they “often do this backwards.” Buying low and selling high is a fundamental investment principle, but U.S. companies don’t follow it, the paper observed. As evidence, WSJ cited how U.S. companies maximized buybacks at stock price peaks during the 2000 dot-com bubble and the 2008 financial crisis, only to slash repurchases when prices collapsed and stocks became cheap.
Specifically, S&P 500 companies bought back shares at what was then a record pace during the quarter when the dot-com bubble peaked. At that time, the real buyback yield—buybacks as a percentage of S&P 500 market capitalization—was just 1.2%. Three years later, buyback volume had fallen roughly 40%, yet the real buyback yield was actually one-third higher. Companies had increased buybacks when stocks were expensive and reduced them when prices later fell.
A similar pattern emerged during the financial crisis. Buybacks hit an all-time high in 2007 when stock prices peaked, but by spring 2009, when the market was deeply undervalued, buyback volume had plummeted 85%.
“This is a repeated pattern among U.S. companies,” WSJ noted, adding that “executives, who are in the best position to know whether their own company’s stock is in a bubble, don’t act on that judgment.” The paper concluded, “At least SK Hynix is selling high and buying low.”
WSJ also made clear that buybacks themselves are not inherently wrong. The paper cited Warren Buffett’s past remarks aimed at critics of share repurchases. Buffett argued that claiming all buybacks are harmful to shareholders or the country, or that they benefit CEOs, is the argument of someone who is “either an economic ignoramus or a silver-tongued demagogue.” However, WSJ noted that buybacks may not be a good choice when a stock is expensive. Buffett’s Berkshire Hathaway, which pays no dividend, has also suspended buybacks for nearly two years while accumulating a record cash pile.
Wall Street investment banks also offered positive assessments of the buyback decision. Global investment bank Barclays noted that the stock is “severely undervalued” at a price-to-earnings ratio (P/E) of 3.8x based on this year’s estimates, maintaining an “Overweight” rating with an ADR target price of $300 (approximately ₩420,000). Nomura Securities also maintained its Buy rating, citing the company’s High Bandwidth Memory (HBM) market dominance and earnings growth driven by artificial intelligence (AI) demand.
Peter Lee, an analyst at Citigroup, said the move “will serve as a meaningful near-term floor for the stock and provide tangible downside support.” Sanjeev Rana, an analyst at CLSA, also noted that “the size of this buyback will meet investor expectations,” and forecast the possibility of additional buybacks and special dividends going forward.
Meanwhile, under its new shareholder return policy, SK Hynix will repurchase 24.07 million common shares on the open market and cancel them in full. The planned acquisition amount is ₩40 trillion (approximately $28.9 billion). The company plans to return more than 50% of cumulative free cash flow (FCF) over the three-year period from 2025 to 2027 to shareholders.