After improving shareholder value as the stock price plummeted
3 trillion won purchased within 3 months - all incinerated
“Short-term prescription… “HBM concerns must be resolved”
Samsung Electronics will purchase 10 trillion won worth of treasury stock over the next year. As the stock price fell by about 33% this year and reached ‘40,000’, the company set out to improve shareholder value. It has been 7 years since January 2017 that Samsung Electronics decided to purchase a large amount of shares worth close to 10 trillion won.
On the 15th, Samsung Electronics held a board meeting and decided to purchase 10 trillion won worth of treasury stock over the course of one year to improve shareholder value. Of these, 3 trillion won was decided to be purchased through over-the-counter purchases and incinerated in full within three months from the 18th to February 17th of next year. There are 50,144,628 shares of common stock and 6,912,036 shares of preferred stock. It was decided to hold an additional board meeting and decide on the purchase period and utilization plan for the remaining 7 trillion won worth. This means that the possibility of additional incineration of all or part of 7 trillion won worth of treasury stock is also open.
Samsung Electronics’ surprise announcement of a policy to enhance shareholder value on a scale that exceeded market expectations can be interpreted as its intention to actively defend its stock price. Due to lower-than-expected performance in October and delays in the supply of high-bandwidth memory (HBM) for artificial intelligence (AI), Vice Chairman Jeon Young-hyun of the DS (semiconductor) division issued an ‘apology’. Afterwards, as the risk of damage to the semiconductor supply chain due to the ‘Trump Storm’ arose and stock prices continued to fall, special measures were taken to purchase and cancel treasury shares.
Samsung Electronics’ stock price has been falling continuously for four months since hitting the 80,000 won range in early August. On the 14th, the stock price recorded 49,900 won, falling to ‘40,000’ for the first time in 4 years and 5 months since June 2020. Although it succeeded in rebounding by 7.21% on the 15th with the recovery of foreign buying, concerns still remain. As Samsung Electronics’ stock price falls, shareholders’ dissatisfaction is also increasing.
In the securities world, there are also expectations about the effect of share buybacks. It rose more than 3% in after-hours trading on news of the share buyback. Previously, Samsung Electronics purchased and canceled its own shares worth 11.3 trillion won in October 2015, the largest ever, and 9.3 trillion won in early 2017. In 2017, the stock price soared by about 50% in the nine months following the announcement. As Samsung Electronics’ price-to-book ratio (PBR) fell below 0.9 as of the 14th, some are analyzing that the current stock price decline is excessively ‘oversold’ compared to the company’s value. A PBR below 1 means that the market capitalization is lower than the company’s assets.
Reporter Jeon Nam-hyuk forward@donga.com