Samsung Plummets Over 8%... Why the Divergent Reaction to Shareholder Returns?

[Anchor]

Samsung Electronics announced a massive shareholder return policy worth up to 110 trillion won, but its shares plunged by over 8% yesterday. SK Hynix, which previously implemented shareholder returns, also saw its stock fall, but the drop was relatively smaller.

Reporter Kim Hye-min has the details.

[Reporter]

Following the disclosure of its shareholder return policy last Friday, Samsung Electronics' downward trend on the alternative trading system carried over into the regular market.

The decline widened further, closing down 8.7% at 257,000 won.

SK Hynix also declined, but limited its loss to the 3% range.

The differing market responses to the two semiconductor giants are attributed to the specifics of their shareholder return plans.

While Samsung's announced scale of 90 trillion to 110 trillion won is the largest ever, nothing has been finalized beyond a 30 trillion won cash dividend for the third quarter.

Compared to SK Hynix, which announced it would repurchase and entirely retire 40 trillion won worth of treasury shares, Samsung's plan was evaluated as falling short of expectations.

The market generally views the retirement of treasury shares—which permanently increases per-share value by reducing the number of outstanding shares—as a more direct stock price booster.

[Lee Hyo-seop / Director of Financial Industry Research, Korea Capital Market Institute: Because retirement immediately increases earnings per share, share buybacks and retirements have had a major impact on stock price increases in the United States as well.]

Expectations that massive treasury share retirement might be difficult for Samsung to execute in the remaining 60 trillion to 80 trillion won of shareholder returns were also factored in.

This is because the equity stakes in Samsung Electronics held by financial affiliates Samsung Life Insurance and Samsung Fire & Marine Insurance are already at the 10% limit under the Financial Industry Structural Improvement Act, and if Samsung Electronics retires its treasury shares, those stakes would exceed the limit.

Therefore, large-scale retirement is difficult, and even if a portion is retired, Samsung Life and Fire would be forced to dump shares exceeding the limit onto the market.

In the securities sector, the possibility of purchasing and retiring preferred shares—which lack voting rights and are thus excluded from equity limit calculations—has also been raised.

[Kim Soo-hyun / Head of Research Center, DS Securities: Preferred stocks are always cheaper than common stocks. Buying and retiring more of them has the effect of reducing the total number of outstanding shares significantly more. In this case, earnings per share increase even more for common stock shareholders as well.]

Samsung Electronics' remaining shareholder return scale and specific methods are scheduled to be decided at a board meeting in January next year.

(Reported by Ha Ryong | Video edited by Park Chun-bae | Design by Choi Jae-young)
※ Please note: This article was translated by AI and may contain errors.