SEOUL, Aug 24 (Reuters) – Shares of Samsung Electronics fell over 8% in early trade on Monday after the company’s record $79 billion shareholder-return plan disappointed investors who had expected a larger share of Samsung’s AI-fueled cash windfalls and greater clarity on share buybacks.
Samsung and rival SK Hynix last week announced major shareholder return plans, following mounting pressure from investors to return some of the gains from their record-breaking profits as the AI boom drives demand for chips.
Samsung said on Friday this year’s shareholder returns would be 90 trillion won to 110 trillion won ($65 billion to $80 billion), including 30 trillion won in cash dividends in the third quarter.
While five times the previous record-high returns of 2020, analysts said the projected returns were smaller than they had anticipated and that they had expected more details on the buyback plans.
Samsung said it continues to commit 50% of free cash flow accumulated over the three-year period to shareholders, under its 2024 to 2026 shareholder return policy.
Rival SK Hynix said last week it will buy back and cancel 40 trillion won of treasury shares and allocate more than 50% of its free cash flow generated between 2025 and 2027 to boost shareholder returns.
SK Hynix was down 2.5%. The benchmark KOSPI index fell 3.1%.
“Unlike SK Hynix, Samsung Electronics did not mention the possibility of raising its existing shareholder return policy, nor did it announce a plan to cancel treasury shares that could more directly contribute to the stock price increase, which is disappointing,” Sohn In-joon, an analyst at Eugene Securities, said in a report.
SAMSUNG’S OWNERSHIP STRUCTURE
Investors had been looking for a larger share of Samsung’s capital returns to come through buybacks, which would give direct support to Samsung’s stock.
But share buybacks could be complicated by Samsung’s ownership structure, as they could push major shareholders Samsung Life and Samsung Fire above regulatory ownership limits, forcing the affiliates to sell shares to bring their combined ownership below 10%.
Therefore, Samsung’s remaining funds of 60 trillion won to 80 trillion won are expected to be used mainly for dividends, with only 10 trillion won to 20 trillion won expected to be allocated to share buybacks and cancellations, Kim Soo-hyun, head of research at DS Investment & Securities, said.
Samsung Life and Samsung Fire also slumped 9.9% and 8%, respectively.
Samsung Electronics said on Friday its board will decide remaining payouts in January 2027, with cash dividends, share buybacks and share cancellations to be considered.
“Big capital returns, slightly below expectations,” Morgan Stanley said in a report.
It said investors would need to watch out for the company’s next capital-return framework, which will take effect next year.
($1 = 1,383.7100 won)
(Reporting by Hyunjoo Jin, Jihoon Lee and Tom Westbrook ; Editing by Clarence Fernandez, Lincoln Feast and Stephen Coates)
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