How will the 110 trillion KRW AI dividend be distributed? Seoul-based hedge fund pressures Samsung to immediately buy back and cancel preferred shares

According to Zhitong Caijing APP, a South Korean hedge fund is urging Samsung Electronics to repurchase and cancel its preferred shares, becoming one of the first shareholders to directly push for this move in an effort to boost the company's valuation.

According to a statement from the fund, Life Asset Management this week sent a letter to Samsung's board and management, calling on the South Korean tech giant to buy back and cancel these shares until the price gap between them and common shares is eliminated. Life Asset, which did not disclose the size of its stake in Samsung, is requesting the board to review the plan at its October meeting and to complete the cancellation by December.

Life Asset's call suggests that more shareholders may pressure Samsung in the future. Previously, this chip manufacturer recently announced a plan to return up to 110 trillion won (81.7 billion USD) to investors this year to share the AI-driven windfall. Although Samsung has not yet fully disclosed details, those following the company have repeatedly emphasized the need to repurchase preferred shares, as they are trading at a significant discount compared to common shares.

The price gap between preferred and common shares widens

This Seoul-based hedge fund said that after deducting special and regular dividends, up to 73 trillion won of the shareholder return program should be allocated for share buybacks.

Currently, its preferred shares are trading at more than a 25% discount compared to common shares. Market observers expect Samsung to allocate a large portion of the buyback to preferred shares, as this approach is more cost-efficient.

According to Life Asset, Samsung can currently cancel 1.36 preferred shares for the same amount of money needed to cancel one common share. According to the fund's website, it manages assets worth 4 billion USD.

Avoiding the buyback of common shares would also help Samsung sidestep a regulation that could force its affiliates to reduce their holdings. South Korean law prohibits financial affiliates from holding more than 10% of voting common shares.