Dongyang to cancel 10% of shares, pursue 2-for-1 reverse stock split to escape 'penny stock' status

Dongyang, a member of the Yujin Group, plans to cancel 71.9 billion won ($52 million) worth of treasury shares and pursue a 2-for-1 reverse stock split, moves the company said reflect its commitment to shareholder returns.

Dongyang announced Monday that its board had resolved to cancel a total of 24,611,979 treasury shares — comprising 24,439,999 common shares and 171,980 preferred shares — at an estimated value of 71.9 billion won. The cancellation is scheduled for June 9. Based on the disclosure, the shares being canceled represented 51.34 percent of the company's market capitalization at the time.

Earlier, on May 21, Dongyang had flagged the same number of shares — approximately 10.26 percent of total issued shares — as cancellation targets, saying a board resolution would formally confirm the plan in June. The company cited "enhancement of shareholder value" as the purpose.

Alongside the share cancellation, Dongyang is also pursuing a 2-for-1 reverse stock split that would raise the par value per share from 500 won to 1,000 won. The proposal is set to be put to a vote at an extraordinary shareholders' meeting on June 22. Trading in Dongyang shares is expected to be suspended from July 3, with trading scheduled to resume July 20.

Earnings improvement remains a work in progress. Dongyang posted consolidated sales of 125.4 billion won, an operating loss of 8.7 billion won and a net profit of 7.1 billion won in the first quarter of this year. In the same period last year, the company recorded sales of 156.3 billion won, an operating loss of 6 billion won and a net loss of 10.4 billion won. While the bottom line swung to a profit, the operating loss widened year on year.

In the fourth quarter of last year, Dongyang posted sales of 150.1 billion won, an operating loss of 5.4 billion won and a net profit of 31.1 billion won. With the construction sector still sluggish, restoring profitability in its core business and delivering results from development projects are seen as key to lifting the company's overall value.

Dongyang is expanding into development and new business areas on the back of its existing ready-mixed concrete and building materials operations. The company said it aims to improve its earnings structure through development projects including Studio Eugenia, Itaewon 111 and Geumwang F1, while positioning AI data centers and senior housing as next-generation growth engines.

"The cancellation of 71.9 billion won in treasury shares is a decision that puts our commitment to shareholder value into action," a Dongyang official said. "We will use this permanent cancellation of more than 10 percent of issued shares, together with the reverse stock split, as an opportunity to improve the predictability of our capital policy and strengthen investor relations activities so that the company's value is properly recognized by the market."

Meanwhile, Dongyang's share price stood in the 500-won range as of Monday, placing it in the category of "penny stocks" — a term used in Korea for shares trading below 1,000 won per share.