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Naver uses $400mil treasury shares for staff compensation and share swaps Korean internet giant benefits from surge in treasury stock value

Translated by Ryu Ho-joung 공개 2021-07-27 10:32:36

이 기사는 2021년 07월 27일 07:57 더벨 유료페이지에 표출된 기사입니다.

Naver has used treasury shares worth 461 billion won ($400 million) so far this year for employee compensation and strategic share swaps, as the South Korean internet giant takes advantage of its rising stock price.

Approximately 1.22 million treasury shares have been used by Naver for the first seven months of this year for its stock compensation program and strategic partnerships with other companies, according to industry sources. The shares are worth 461 billion won based on prices reported by the company and worth more than 537 billion won based on Thursday’s closing price of 440,000 won apiece.

Naver currently holds about 15.3 million treasury shares, or 9.3% of its total outstanding shares. This is down from 10.2% at the beginning of the year.

Naver’s stock price has moved sharply higher this year, from 293,000 won in early January to 440,000 won on Thursday. Consequently, its treasury shares have surged in value from 4.92 trillion won to 6.74 trillion won in the same period despite the decreased number.

Treasury shares are useful for Naver’s stock compensation policy as the company strengthens compensation incentives to retain talent. Earlier this month it used 74,768 treasury shares to award 31 billion won stock grants to employees, apart from its annual employee stock option program launched in 2019. The company also awarded stock options worth 3.1 billion won to senior executives earlier this year.

Share swaps with strategic allies are another way for Naver to have used its treasury shares. Naver has exchanged its shares for those in Mirae Asset Daewoo, CJ Logistics, CJ ENM and Studio Dragon in recent years.

In March this year, Naver struck a 250 billion won share swap deal with retail conglomerate Shinsegae Group where the internet giant exchanged its 389,106 shares worth 150 billion won for 824,176 shares in Emart and its 259,404 shares worth 100 billion won for 488,998 shares in Shinsaegae International.

When Naver acquired Canada-based storytelling platform Wattpad for 684.8 billion won in May, it paid 507.9 billion won in cash and the remaining 176.9 billion won in treasury shares. After the deal closed, studio divisions of the two companies were merged to create Wattpad Webtoon Studios, with 167 million monthly users and 6 million creators globally.

Naver is likely to continue to benefit from the upward trend in its stock price as a higher stock price and subsequent rise in the value of its treasury shares could increase the company capacity to invest in new business opportunities with less cash.

Most of the treasury shares held by Naver were repurchased from 2005 to 2015. Treasury shares accounted for only 0.6% of the company’s total outstanding shares in 2005, but the proportion increased to 11.4% in 2015. The average cost basis for the shares is about 72,000 won per share, roughly one-sixth the current stock price. (Reporting by Seul-gi Kim)
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