Samsung to buy back additional $2 bil. in treasury stock

Samsung's flag waves at Samsung Electronics' office in Seocho District, Seoul, Jan. 31. Newsis

Samsung Electronics announced Tuesday that it will repurchase 3 trillion won ($2.08 billion) worth of its shares from February to May, entering the second phase of its 10 trillion won buyback program launched in November last year.

However, the company did not clarify its plans for the newly acquired shares, unlike the 3 trillion won worth of shares purchased in the first phase, which are set to be canceled on Thursday.

The move is seen as an effort to address persistent doubts over whether Samsung’s treasury share cancellations can effectively lift its sluggish stock price.

In a regulatory filing, Samsung Electronics said its board decided to buy back 4.81 million common shares and 6.64 million preferred stock from Wednesday to May 16. Based on Monday’s closing prices, their combined value stands at 3 trillion won.

Samsung Electronics announced on Nov. 15 that it will buy back 10 trillion won of its shares throughout 2025 to prevent further decline in its falling stock prices. Then, the company said it would repurchase and cancel 3 trillion won of shares in the first phase and determine when and how to buy back shares worth the remaining 7 trillion won.

Since announcing the plan, the company has been repurchasing up to 1 million shares every session and finished collecting its shares worth 3.05 trillion won on Monday. Samsung said Tuesday that it will cancel them as planned while launching the second phase of the buyback program.

A monitor at the Korea Exchange in Seoul shows Samsung Electronics' common share price, Nov. 15. Newsis

With 4 trillion won remaining, an official at Samsung Electronics said the company’s board “will determine plans in the near future after reviewing various factors that can help lift share prices.”

Unlike in the first phase, Samsung Electronics has not specified plans to cancel the shares repurchased in the second phase. The company stated that 500 billion won worth of shares would be allocated for executive incentives through restricted stock awards but only mentioned that the remaining 2.5 trillion won worth of shares would be acquired for “stabilizing stock prices and improving shareholder value.”

One possible reason for Samsung Electronics' reluctance to commit to a cancellation this time is the ongoing debate over the effectiveness of canceling treasury shares.

Samsung Electronics’ common shares closed at 53,500 won when the company announced the 10 trillion won program in November, but the share price only ended at 56,000 won on Monday, achieving only a 4.67 percent, or 2,500 won, increase despite spending 3 trillion won in the first phase. The company's common share price inched up 1.61 percent from a session earlier, closing at 56,900 won, Tuesday.

Canceling treasury shares is one of the most common strategies for boosting stock prices, as it reduces the total number of outstanding shares. However, in Samsung Electronics’ case, the full impact of such measures is not realized due to Korea’s regulations.

Korea’s fair trade, banking and financial laws restrict financial companies from holding more than a 10 percent stake in a nonfinancial company. Currently, Samsung Life Insurance and Samsung Fire & Marine Insurance hold a combined 10 percent stake in Samsung Electronics. When Samsung Electronics cancels 3 trillion won of its shares, this pushes up the insurers’ combined stake in the tech company to 10.08 percent.

Due to this, the two insurers on Feb. 12 unloaded their 0.08 percent stake in Samsung Electronics in block deals. This means that if Samsung Electronics decides to cancel 7 trillion won of treasury shares, the two insurers have to unload the tech company’s shares worth approximately 600 billion to 700 billion won, making the buyback program less effective.

The Samsung Electronics official said the company’s board will “consider various factors into account” when deciding what to do with its treasury shares.

Meanwhile, Samsung Electronics’ board nominated Jun Young-hyun, vice chairman of the memory division, as one of its new board members. Also, the board nominated Song Jai-hyuk, chief technology officer of the memory division, as a new member, while granting a new three-year term to existing board member Lee Jung-bae, president of the memory division.

If the nominations are approved in the company’s annual general meeting on March 19, the company’s board will have 10 seats, up from nine currently, and will have three chip experts on the board. As widely expected, Samsung Electronics Executive Chairman Lee Jae-yong was not nominated during Tuesday’s meeting.