Another Challenge for the 'New Samsung,' Lee Jae-yong Emphasizes 'Stock Price Boost'

Executives Buy 11.7 Billion KRW of Company Shares
Lee Firm on Shareholder-Friendly Management Commitment
Innovative Technology Vision Drives Stock Price

Samsung Electronics Chairman Lee Jae-yong visits the automotive multilayer ceramic capacitor (MLCC) production plant located at Samsung Electro-Mechanics' Busan plant on July 16, 2020, to inspect MLCC products. (Photo by Yonhap News)

[Asia Economy Reporter Moon Chaeseok]

"Samsung must grow together with society. It must share and grow alongside customers, shareholders, partner companies, and local communities."

Samsung Electronics Chairman Lee Jae-yong declared his intention to share profits with shareholders and the company in a post titled "Challenge for the Future" on the internal bulletin board on the 27th, following his inauguration.

However, for Chairman Lee's promise to be fulfilled, it is urgent to boost Samsung Electronics' stock price, which is currently far below expectations. Right after the announcement of Lee's promotion, Samsung Electronics briefly reclaimed the "60,000 won electronics" mark but fell back to the 50,000 won range on the 28th.

Although global economic downturns, market recessions, and simultaneous adverse factors such as the US interest rate hikes have overlapped, both the market and the company internally share the perception that the current stock price is excessively undervalued compared to the corporate value.

According to the Korea Exchange, the one-year return based on the closing price of 59,500 won on the day before Lee's inauguration is only -15.1%. Generally, the current stock price reflects investors' expectations of the company's value six months ahead. The decline in the stock price in October indicates that since April, investors have harshly evaluated the momentum (growth driver) of the stock.

However, Samsung Electronics' management has purchased treasury shares. Executives buying treasury shares is not only a "material" to boost the company's stock price but also a management action that declares confidence in the company's fundamentals and momentum to the market. According to the Financial Supervisory Service, from the beginning of this year until last month, 73 Samsung Electronics executives purchased 178,200 common shares (worth 11.71 billion won). Vice Chairman Han Jong-hee, Head of the Device Experience (DX) Division; President Kyung Kye-hyun, Head of the Semiconductor (DS) Division; President Noh Tae-moon, Head of the Mobile Experience (MX) Division; and President Lee Jung-bae, Head of the DS Division Memory Business Unit, among others, bought treasury shares.

There is also a view that Samsung Electronics returning cash dividends on the scale of trillions of won to shareholders on the day it announced third-quarter earnings, with operating profit down more than 30% year-on-year, demonstrates Chairman Lee's commitment to a "shareholder-friendly policy." The day before, Samsung Electronics resolved to pay a total cash dividend of 2.4521 trillion won, returning 361 won per common share to shareholders. As of June, there were 5,922,693 small shareholders holding Samsung Electronics common shares.

It is analyzed that semiconductor market conditions, price trends, the company's new technology and product announcements, and securing major customers have had a greater impact on the stock price than changes in Chairman Lee's personal status.

It is noteworthy that the financial investment sector (institutional investors) has given a positive evaluation of the company's vision of "developing technology that does not exist in the world," which Chairman Lee presented. In his post the day before, Chairman Lee cited "technology that does not exist in the world" as Samsung's vision. The "innovative technologies" he highlighted are Samsung Electronics DS Division's foundry leading-edge semiconductor manufacturing processes and Samsung BioLogics, a bio affiliate's world-class CDMO (Contract Development and Manufacturing Organization) technology. Since the group's two future pillars, semiconductors and bio, are in the form of contract manufacturing, survival of the group is impossible without major customers. Institutional investors also agree that the "magic potion" for securing customers is not Chairman Lee's inauguration but "overwhelming technological innovation," so the vision he presented is likely to have a positive effect on stock price appreciation.

Kim Rok-ho, a researcher at Hana Financial Investment, who monitored Samsung Electronics' daily stock price after Chairman Lee's inauguration and published a report that morning, evaluated, "Samsung Electronics plans to execute capital expenditures (Capex) next year despite the semiconductor market downturn to invest in infrastructure and secure leading-edge processes, laying the foundation for medium- to long-term growth. Having secured the strength to endure the downturn, the company will be able to reap the benefits of proactive investments when the market recovers."

This content was produced with the assistance of AI translation services.