Samsung Electronics' stock price dropped more than 8% on August 24, despite announcing a record 110 trillion won ($82 billion) shareholder return plan on August 21. Investor reactions were lukewarm, contrasting sharply with SK Hynix, which saw its shares rise over 12% following a 40 trillion won buyback and cancellation announcement. Analysts suggest that the shareholder return fell short of market expectations, particularly due to the Financial Industry Structure Improvement Act, which prevented Samsung from detailing its stock buyback plans.
According to the Korea Exchange, Samsung Electronics closed at 257,000 won, down 24,500 won (8.70%) from the previous trading day. Samsung's preferred shares also fell 8.55% to 189,300 won. Other Samsung affiliates, including Samsung Life (-13.09%) and Samsung C&T (-7.84%), also experienced significant declines.
The sharp drop in Samsung's stock is unusual given the scale of its shareholder return plan. In comparison, SK Hynix's stock rose nearly 15% over two days following its announcement on August 19. During trading, SK Hynix shares peaked at 1,792,000 won but closed at 1,671,000 won, down 59,000 won (3.41%) due to late selling pressure.
The differing stock performances of Samsung and SK Hynix stem from varying market evaluations of their shareholder return policies. SK Hynix's plan to buy back and cancel 40.43 trillion won worth of shares is seen as a clear enhancement of per-share value, as it will eliminate about 3.3% of its outstanding shares.
In contrast, Samsung's announcement of a 90 trillion to 110 trillion won shareholder return plan for 2026 lacked specific details on stock buybacks. Approximately 30 trillion won will be distributed as cash dividends, while the execution method and scale for the remaining 60 trillion to 80 trillion won will be determined later.
As a result, while the total amount is the largest in history, it did not meet market expectations. Choi Bo-young, a researcher at Kyobo Securities, noted, "The market has been focused on how the strong semiconductor industry and increased free cash flow will translate into additional returns. The lack of aggressive buybacks and cancellations means it cannot be seen as a 'surprise return.'" Kim Gi-baek, a researcher at Shinhan Investment Corp, added, "The market perceives that the shareholder return material has diminished as it did not exceed expectations."
Concerns regarding the Financial Industry Structure Improvement Act have been cited as a reason for Samsung's inability to announce stock cancellations. If Samsung were to buy back and cancel its common shares, the ownership stakes of its financial affiliates, Samsung Life and Samsung Fire, could exceed the 10% limit set by the act. Currently, Samsung Life holds about 8.51% and Samsung Fire holds 1.49% of Samsung Electronics' common shares, totaling approximately 9.99%.
DS Investment & Securities estimates that, considering these constraints, the remaining 70 trillion won of the shareholder return funds to be executed in January 2027 will likely see 10 trillion to 20 trillion won allocated for buybacks and cancellations, with the remaining 50 trillion to 60 trillion won likely going to dividends. Kim Soo-hyun, head of the research center at DS Investment & Securities, warned that if 100% of the shareholder return funds are allocated solely to dividends due to concerns over the dilution of control from block deals involving financial affiliates, the market's assessment of the quality of shareholder returns compared to SK Hynix could decline.
However, some analysts believe that the sharp decline in Samsung's stock cannot be solely attributed to shareholder return issues. They suggest that broader market risk aversion and profit-taking in semiconductor stocks also played a role. Meanwhile, the KOSPI index fell by 215.99 points (3.12%) to close at 6,696.96, driven down by the decline in Samsung Group stocks. In contrast, the KOSDAQ index rose by 11.39 points (1.42%) to 813.33. Lee Kyung-min, a researcher at Daishin Securities, stated, "While weakness is evident in the semiconductor sector, a rotation into other sectors is occurring, indicating that the market's decline should be interpreted as an adjustment due to the drop in Samsung affiliates' stock prices rather than a general market downturn."
* This article has been translated by AI.
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