By Yoon Ja-young
As Samsung C&T shares continue to fall on the stock market, the National Pension Fund (NPF) is estimated to have sustained hundreds of billions of won in losses.
Samsung C&T remained unchanged at 125,500 won on the Seoul bourse, Tuesday. It has lost around 40 percent since May 27 last year when it touched 215,500 won during trading.
The company has been faltering both domestically and internationally since last September when it merged with Cheil Industries, the Samsung Group’s fashion and resort firm. Its construction sector failed to win orders in the Middle East due to low oil prices while the fashion and resort businesses were hit by the sluggish domestic economy.
Securities companies are thus lowering their target prices for Samsung C&T. Hi Investment and Securities pulled down the company’s target price from 300,000 won to 180,000 won, citing sluggish performance.
On the pessimistic outlook, institutional investors are selling Samsung C&T shares.
They have sold shares worth 4.1 billion won so far since March.
The National Pension Service (NPS) announced that it had a 5.96 percent stake in Samsung C&T last September, but it is estimated that it currently holds a much lower stake.
The NPF operator, however, is facing criticism for having approved of the merger between Samsung C&T and Cheil Industries.
The NPS, which had held a 5.04 percent stake in Cheil and 11.61 percent in Samsung C&T, approved the merger at a general shareholders’ meeting last July.
This sparked controversy as global and domestic corporate advisory firms, including the Institutional Shareholder Services and Glass Lewis as well as the country’s Korea Corporate Governance Service, had advised the pension service not to, as it would undermine shareholder value and lose money that would be paid to private citizens.
Samsung Group had envisioned the new Samsung C&T would grow into a sustaining pillar of the group along with Samsung Electronics, recording 60 trillion won annual sales by 2020. But corporate advisory firms pointed out that the merger had unfavorable conditions for Samsung C&T shareholders while being apparently aimed at handing over control of the group to the vice chairman of Samsung Electronics, Lee Jae-yong, from Chairman Lee Kun-hee, his father.
“We would not blame the National Pension Service simply because of the fall in share prices. What is more important is that it should have made a more discrete decision back then regarding the merger,” said Kim Sang-jo, an economics professor at Hansung University.
“The pension fund made a wrong decision, not only in that it damaged the asset value of the National Pension, but also in that it didn’t exercise its right as a shareholder fairly following due process.”