Hyundai’s land purchase woes spark buyback

 
Joseph Millis
Hyundai Avante is one of the Korean firm’s best sellers
HYUNDAI and its affiliate Kia Motors yesterday announced they would buy back a combined 670bn won (£383m) of shares, marking the South Korean auto makers’ latest efforts to appease investors angered by the company buying property at three times it value.

Hyundai said it would buy back 449bn won of common and preferred shares, while Kia announced it would buy back 220.9bn won of stock.

Shares in the three companies plunged to multiyear lows after they jointly bought a plot of land for a new headquarters in southern Seoul’s affluent Gangnam district for about $10bn (£6.3bn) – three times the property’s assessed value.

Investors dumped shares after the purchase, fearing the companies were wasting cash that could have been returned to shareholders on a trophy property, all while they struggled to compete with foreign rivals.

The firms pursued the deal after the South Korean government said it would raise taxes on cash-hoarding companies, unless they spent more on wages, dividends and other investments, which included land purchases.

While the boards of all three affiliates approved the purchase, members said they did not know the price tag in advance, which raised investors’ fears about a lack of transparency.

Hyundai’s stock rose as much as 7.2 per cent in Seoul after the announcement before closing 5.7 per cent higher at 176,000 won, still some 20 per cent off its share price before the land purchase two months ago.