Naver to retire $306 mn shares, but stock remains weak

South Korea’s leading internet portal operator Naver Corp. will buy back and retire about 400 billion won ($306 million) worth of shares by the end of this year after its stock remained lackluster despite solid business performance throughout this year.

The company announced in a regulatory filing on Monday that it will spend 401.2 billion won to repurchase 2,347,500 company shares in the market from Oct. 2 to Dec. 28 and then cancel them on Dec. 31.

The treasury shares to retire account for 1.5% of Naver’s total shares issued, the company said.

This is separate from the Korean internet giant’s three-year program to buy back and cancel 3% of its total shares issued, a plan announced in May last year as part of the company’s shareholder-friendly policies, the company said.

The additional share retirement comes as investors have shunned Naver shares on concerns over the company’s future growth despite its solid earnings performance. The stock lost 23.9% in the past nine months.

On Monday, Naver shares shot up to as high as 177,300 won in the morning session on the share buyback news but closed the day with a 0.6% loss at 169,400 won.

DIVIDENDS FROM A HOLDINGS

Naver said it will use half of the 73.2 billion yen ($515.3 million) dividends paid by A Holdings Corp., a holding company owned equally by Naver and Japan’s SoftBank Corp., in August and September.

The holding company sold its stake in LY Corp., the operator of Japan’s top mobile messenger app Line, during the latter’s 150 billion yen tender offer designed to beef up the proportion of its tradable shares to 35% or above to stay in the Tokyo Stock Exchange’s Prime Section.

A Holdings is the largest stakeholder of LY. Following the recent stake sale, A Holdings’ share ownership in LY dropped to 62.50% from 63.56%.

Naver has been under pressure from the Japanese government to shed its control in Line in Japan as part of the state's corrective measures for data leaks.

CONCERNS OVER FUTURE

As Line is one of Naver’s few successful overseas businesses, the breakup news with the Japanese partner has weighed on Naver's shares.

But during an earnings call in August, Naver CEO Choi Soo-yeon said the company has no plans to sell shares in LY for the foreseeable term.

Naver reported record high operating profit and sales in the second quarter ended June thanks to solid growth of its key businesses. It extended its on-year growth streak for the sixth consecutive quarter.

Such stellar results, however, failed to uplift its stock as investors remained doubtful about the company’s future growth potential.  

Naver pins high hopes on its AI platform HyperCLOVA X as a new growth engine and has released a slew of newly upgraded AI solutions.

But it is considered behind its foreign rivals in developing AI services, keeping investors in a wait-and-see mode about its AI challenge.

Naver executives recently rushed to buy company shares to shore up the stock value.

CEO Choi purchased 1,244 shares for 199 million won earlier this month, followed by other executives buying more than 1,100 shares together this month. Their efforts have yet to bear fruit. 

Write to Ji-Eun Jeong at jeong@hankyung.com

Sookyung Seo edited this article.