South Korean hedge fund Life Asset Management is urging Samsung Electronics to use part of its planned shareholder returns to repurchase and cancel preferred shares, arguing that the move could help close the substantial valuation gap with the company’s common stock, according to a report by Bloomberg.
Life Asset sent a letter to Samsung’s board and management this week calling for the technology group to buy back preferred shares until their discount to common stock has been eliminated. The hedge fund, which has not disclosed the size of its Samsung holding, is asking the board to consider the proposal at its October meeting and complete the cancellation by December.
The campaign adds to growing investor pressure on Samsung over how it deploys a planned shareholder-return programme worth as much as KRW110tn ($81.7bn) this year, following the company’s strong performance from the artificial intelligence-driven semiconductor boom.
Life Asset said as much as KRW73tn of the package, after accounting for regular and special dividends, should be directed towards share repurchases.
Samsung’s preferred shares currently trade at a discount of more than 25% to the common stock, according to Life Asset, with the gap having widened to levels that have attracted increasing attention from investors. The preferred shares gained as much as 3.3% on Tuesday, while the common stock rose about 1%.
The hedge fund argues that the discount makes preferred shares a more efficient target for Samsung’s buyback programme. According to Life Asset, the company could cancel approximately 1.36 preferred shares for the amount of capital required to repurchase one common share.
The proposal also has implications for Samsung’s corporate ownership structure. Directing a larger proportion of the buyback towards preferred shares could allow the company to avoid some of the consequences of a Korean rule restricting financial affiliates from owning more than 10% of voting common shares.
Life Asset, which manages approximately $4bn in assets, is among the shareholders increasingly pushing Korean companies to address persistent discounts and improve capital allocation. The fund’s intervention comes as Samsung prepares to deploy a substantial amount of cash following the surge in demand for AI-related chips.
Investors have increasingly focused on preferred shares as a potential target for Samsung’s capital-return programme because of their unusually wide discount to the common stock. A buyback and cancellation programme targeted at the class could therefore provide a mechanism for narrowing the valuation gap while returning capital to shareholders.
