Samsung Shares Surge Amid $7.2 Billion Buyback Plan and Leadership Challenges
Samsung Electronics Co. shares soared as South Korea’s largest firm revealed an unexpected plan to buy back approximately 10 trillion won ($7.2 billion) of its own stock over the next year.
The first repurchases in seven years are intended to increase stock value and may assist the founding family avoid a margin call.
The South Korean tech giant’s stock jumped more than 7% in Seoul, after rising 7.21% on Fridayon reports that the business had reached a preliminary agreement with its main workers union, which was on strike in July.
Analysts believe the buyback to be a stimulus for the company, though others speculate that it may also help the founding family strengthen its grip. Shares of competitor SK Hynix Inc. have risen around 23% this year due to investor anticipation for its AI processors.
https://twitter.com/CNBC/status/1858347659280433187
According to a regulatory filing, the corporation plans to buy back and cancel 3 trillion won worth of shares during the next three months. The remaining 7 trillion won in share repurchases will be authorized by the Board, which will decide on measures to increase shareholder value, including when and how to use the treasury shares, it added.
Samsung shares fell to a four-year low on November 15 after the firm issued dismal earnings projections for the third quarter and amid concerns about tariffs following U.S. President-elect Donald Trump’s election victory.
Buyback to Strengthen Founding Family’s Control Amid Inheritance Tax and Competitive Pressures
Furthermore, buybacks will allow the founding family to increase its control over the company by lowering externally held shares. It might help them with collateral issues.
The family is paying inheritance taxes on their assets in installments, and they have offered group company shares as collateral. Some members of the family have also pledged shares to borrow money from financial institutions, which carries the risk of margin calls if the price falls below specific levels.
https://twitter.com/ReutersTech/status/1857440954602361258
The company has slipped behind rival SK Hynix in the race to deliver high bandwidth memory, or HBM chips, which are a critical component used by AI leader Nvidia, according to analysts, who believe Samsung has not been able to overcome the gap with SK Hynix on the HBM development path.
While it has stated that it has made “meaningful” advances in AI memory chips, some analysts believe management changes are imminent.
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