Woongjin Thinkbig, a KOSPI-listed company, decided to buy back 10 billion won of its own shares while attempting to placate shareholders irritated by the 'debt guarantee' controversy concerning its parent company. The company's stock price rebounded on the news of the large-scale buyback, but it is advised that in order to sustain a long-term upward trend, share buybacks and performance improvement must follow.
Woongjin Thinkbig announced just before the market closed on the 3rd that it had decided to acquire 5.47 million shares worth 10 billion won to stabilize its stock price and enhance shareholder value. This accounts for about 5% of the total circulating shares and is nearly double the existing own shares held (2.44%). It attracted investor interest as the largest share buyback since the company's establishment. Thinkbig plans to buy back shares until September 3.
Thus far, Thinkbig has not been regarded as an active corporation in shareholder returns. Since its establishment in 2007, it has only conducted share buybacks four times: in 2012 (9.2 billion won), 2017 (4.3 billion won), 2020 (5 billion won), and 2021 (5 billion won). The only instance that led to a stock cancellation was in 2020.
There is speculation in some market circles that the recent share buyback decision was in recognition of the debt guarantee controversy that arose in April. The largest shareholder, Woongjin, which holds 58.78% of Thinkbig's equity, has been pursuing the acquisition of the funeral service company, Freedlife, since December last year and completed it last month.
Woongjin acquired a 99.77% stake in Freedlife from VIG Partners for 887.9 billion won and established a special purpose company (SPC), Primary First, for funding during this process. This SPC will fully acquire 100 billion won worth of new capital securities issued by Woongjin and will finance the acquisition of Freedlife using loans and private bonds. At this time, the subsidiary Thinkbig entered into a funding support agreement to provide credit enhancement.
When Thinkbig unilaterally took on financial burdens without any compensation, shareholders reacted with anger. Minority shareholders of Thinkbig held a rally in front of Woongjin Group's headquarters at the end of April, sharply criticizing Thinkbig for taking on financial burdens without shareholder consent.
Thinkbig has suffered from poor performance in recent years, significantly lowering its stock price. Operating profit reached 30 billion won until 2022, but as new businesses failed to yield significant results, operating profit is expected to drop sharply to 5.6 billion won and 9.2 billion won in 2023 and 2024, respectively. In the first quarter of this year, it recorded sales of 197 billion won and an operating loss of 10.7 billion won due to the impact of withdrawing from the artificial intelligence digital textbook (AIDT) business.
The net loss continued for the past two years, with the stock price, which had surpassed 3,400 won during this period, falling approximately 60% to 1,427 won in April this year. According to NH Investment & Securities' Namu app, the proportion of loss-making investors in Woongjin Thinkbig is 94.64%, with an average return rate of minus (-) 39.91%.
Overall, investor reactions to this large-scale share buyback have been positive. Immediately after the announcement, Thinkbig's stock price recovered to the 1,900 won range for the first time in nine months. On the 4th, it even surged over 10% during the trading session, reaching 2,195 won.
Thinkbig plans to restructure its institutional sector for new business and aim to improve profitability by expanding overseas sales of self-developed platforms in the second half of the year.
There are also opinions suggesting that additional shareholder return measures, such as stock cancellation, are important. Park Jong-ryul, a researcher at Heungkuk Securities, noted, "Although a gradual improvement in performance is expected after the second quarter, it is necessary to focus on company-wide efforts to enhance corporate and shareholder value."
Thinkbig stated, "There are currently no plans to cancel the shares being purchased this time," and added, "In the future, we aim to increase our efforts at the company level regarding shareholder returns."