Kia Motors concluded the first round of stock retirement
- Around 43 million shares, or 9.63 percent of total issued stocks, retired
- Additional shares will be retired this year to fulfill the accord with shareholders
- Reduction in issued share volume may lead share value to rise in the long term
Kia Motors is faithfully fulfilling its promise made to shareholders on November 4, 2000 that it would buy back 80 million shares, or 17.8 percent of total issued shares to retire them in an attempt to give a boost to share valuations.
Since the November shareholder meeting, Kia has bought back around 43.3 million stocks, or 9.63 percent of total issued shares and retired them all. This is a half of the volume that Kia committed to retire last November. Accordingly, Kia’s capital was reduced to 2.03 trillion won from 2.24 trillion won and the number of issued shares also decreased to 406 million from 449 million..
An official at Kia said that the reduction of capital was carried out in compliance with the commercial law with consensus of the board, shareholders and creditors. This buy-back absorbed 20-30 percent of total volume outstanding on the market, opening a strong possibility of a rise in share price in the future, he added.
An analyst at Korea Investment Trust Management & Securities Company noted that the capital reduction will help considerably to push up Kia’s share valuations as it has contributed a great deal in improving financial measures such as EPS and ROE as well as trustworthiness with shareholders.
Kia’s capital reduction distinguished itself from the previous capital reduction cases as it complied with the commercial law instead of the Securities and Exchange Law, which has been avoided by Korean companies because of its complicated legal procedures. Other companies are likely to follow the Kia’s lead.
Still, Kia appears determined to buy back the rest of shares, roughly 37 million, in the second round of the retirement plan by the end of the year. And the action will be coupled with the effort to maximize profitability through an increase in sales at home and abroad as major steps in boosting share value steadily.