SK Hynix to Cancel 3.3% of Shares in $29 Billion Buyback Program

SK Hynix (NASDAQ:SKHY) plans to repurchase about 24.07 million shares, representing roughly 3.3 % of its issued share capital, over a three‑month window and then permanently cancel those shares. The board approved the program, valued at 40 trillion won (about $29 billion), on Aug. 19, and buying began the following day. The company calls it the largest share‑cancellation ever undertaken by a South Korean publicly listed firm.

Unlike many U.S. buybacks where repurchased shares may sit in treasury for years or be used for compensation, this program removes the shares from circulation entirely.

Investor reaction was swift: SK Hynix’s Seoul‑listed shares jumped 12 % on Thursday, recouping most of the prior day’s decline, while its Nasdaq‑listed shares rose about 4 % to close near $163.

Three months, 24 million shares

The terms are unusually concrete. The buying window is already open, the total value is fixed at 40 trillion won, and the repurchases will be executed at whatever market prices emerge over the next three months.

SK Hynix explained the move by stating that the company’s intrinsic value “is not fully reflected in its current stock price.”

What sets this buyback apart is the price level. The Seoul‑listed shares trade at about 8 × earnings, a multiple that is even more attractive when the earnings figure includes one‑time investment gains. At a 8‑times‑earnings valuation, each 100 won spent retiring shares removes roughly 12 won of trailing profit—a degree of efficiency rarely seen in large‑cap tech firms that often trade above 30‑times earnings.

Because the shares are canceled, the effect is permanent. Removing 3.3 % of the share count boosts the earnings attributable to each remaining share by about 3.4 % in every year that follows. The lower the share price, the greater the benefit to the remaining owners.

A ceiling becomes a floor

Alongside the buyback, SK Hynix announced an expansion of its 2025‑2027 shareholder‑return framework. The prior commitment was to return up to 50 % of cumulative free cash flow generated over those three years. The new target raises that floor to “over 50 %,” with the exact scale and timing to be detailed after board approval at the third‑quarter earnings release.

One word changed, and the meaning flipped. Fifty percent used to be the maximum shareholders could expect; if the board follows through, it becomes the minimum. The company intends to combine share repurchases and cancellations with cash dividends.

However, the pledge is percentage‑based, not a fixed amount, and it scales with free cash flow. Memory is among the most cyclical tech businesses, so in a downturn over 50 % of a much smaller cash generation pool translates into a smaller absolute return. A floor of this nature guarantees shareholders a set share of whatever cash the cycle delivers, rather than a promise of a particular dollar amount.

Paid for in cash

Currently, the cash side of the equation is historic. SK Hynix ended the second quarter with net cash of about 69 trillion won.

The quarter itself produced record results across the board. Revenue reached 79.3 trillion won, up 257 % year‑over‑year and 51 % quarter‑over‑quarter, with a 76 % operating margin—both all‑time highs—as prices for AI‑related memory chips continued to climb.

First‑half revenue crossed 100 trillion won for the first time in the company’s history, and management said in July that customer orders were outpacing supply.

The balance sheet is being used to fund two simultaneous initiatives. Two weeks before the buyback, the board approved 54.3 trillion won (roughly $38 billion) for new fabrication plants through 2031. In the same period, the company is retiring $29 billion of its own shares. The contrast illustrates how much cash SK Hynix expects the current memory cycle to generate.

While the buyback is notable, it is the broader shareholder‑return floor that likely matters more over time. Cancelling 3.3 % of a company trading at an 8‑times‑earnings multiple is efficient, but it is a one‑off event. The commitment to return over half of free cash flow through 2027, with repurchased shares permanently canceled, provides a structural boost to shareholders—though the actual amount will shrink when the memory cycle turns, because the program scales with cash generation. At present, cash is flowing faster than SK Hynix can deploy it.

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