Summary

  • Mirae Asset Securities said it will first carry out a treasury share cancellation worth about 1.4 trillion won after next year's annual shareholders meeting.
  • After the first cancellation, the company said it will use the remaining treasury shares for employee compensation and financial structure improvement if shareholders approve, and will actively consider additional cancellations of the rest.
  • The company said it adopted a phased treasury share disposal plan that reflects variables including a decline in equity, market supply pressure, and tax reform, and said it will prevent dilution of shareholder value.

Forecast Trend Report by Period

Mirae Asset Securities said it will first retire treasury shares worth 1.4 trillion won ($1.01 billion) after next year's annual shareholders meeting. The company will review using part of the remainder with shareholder approval and plans to pursue additional cancellations of any shares left after that use.

Mirae Asset Securities disclosed the treasury-share plan during a conference call on Nov. 12. It opted for a phased approach after considering the tax burden and reduction in equity that would result from canceling all of the shares at once. The actual amount retired may vary depending on the share price.

The treasury shares subject to the plan total about 108 million shares and differ from shares the company bought in the market with cash. Chief Financial Officer Lee Kang-hyuk said the stock remained as treasury shares following the merger and acquisition of Daewoo Securities. The company estimates that canceling the full amount would reduce equity by about 460 billion won ($333 million), including the impact of deferred corporate taxes.

After the initial cancellation, the company will review using part of the shares for employee compensation and to improve its financial structure. If shareholders approve that plan at a general meeting, it intends to actively consider additional cancellations of the remaining shares, excluding the portion to be used.

Lee said capital size is important for securities firms expanding overseas and that the company is weighing both the burden of lower capital and shareholder value. "Even if partial use is approved, we promise it will not dilute shareholder value or negatively affect market supply and demand," he said.

The company also plans measures to prevent too much stock from hitting the market at once. Even if the shares are disposed of over five years, it said supply pressure could be eased through long-term holdings by affiliates and by securing friendly shareholders.

Potential tax changes remain another variable. Lee said he understands a proposal to exempt treasury-share disposals from taxation may be discussed in the National Assembly in December, though nothing has been finalized. The company said it set its treasury-share strategy with that institutional uncertainty in mind as well.

YM Lee