Samsung Unveils Up to $79.6 Billion Shareholder Return Plan, Shares Slide 8.7%

Samsung Electronics Co. shares slid nearly 9% after the company unveiled a shareholder return plan worth as much as 110 trillion won ($79.6 billion), in a stark contrast to SK Hynix Inc., whose stock rose after announcing a 40 trillion won ($29 billion) share buyback and cancellation program. In the financial industry, the split reaction is being attributed less to the size of the returns than to how they will be delivered and when they will be carried out.

Samsung’s 110 Trillion Won Shareholder Return vs. SK Hynix’s 40 Trillion Won as Stocks Move in Opposite Directions

According to AI-based investment information platform Epik AI, Samsung Electronics closed regular trading on Aug. 24 down 8.70% from the previous session at 257,000 won. The shares had ended at 270,000 won on Aug. 21 and fell below the 260,000-won level in a single session. Samsung Electronics preferred shares also dropped 8.55% to 189,300 won.

Samsung said after a board meeting on Aug. 21 that it expects to secure 90 trillion won to 110 trillion won for shareholder returns in 2026. Of that, about 30 trillion won ($21.7 billion) will be paid in the third quarter of this year, including 2.45 trillion won in regular quarterly dividends and 27.55 trillion won in additional cash dividends.

The rest will be used for either cash dividends or share buybacks and cancellations. Samsung said it will disclose the method and timing of the additional returns in October and finalize the exact amount and execution plan in January 2027. While the company has disclosed the total amount, it has yet to specify the scale of share cancellations that would directly affect the stock.

Samsung’s overall return plan is much larger than SK Hynix’s, but the market response was the reverse. After the market closed on Aug. 19, SK Hynix announced plans to buy back 40 trillion won ($29 billion) of shares and cancel the entire amount. Its shares jumped 12.73% on Aug. 20 to close at 1.691 million won, then rose another 2.3% on Aug. 21 to finish at 1.73 million won.

The gap in investor reaction appears to reflect how quickly the return plan translates into shareholder value. SK Hynix will repurchase shares in the market and retire 3.3% of its outstanding stock. It also increased its free cash flow payout ratio to more than 50%, raising expectations for additional returns. Samsung, by contrast, will first pay about 30 trillion won in cash dividends in the third quarter, while the format of the remaining returns will not be finalized until January 2027.

SK Hynix Return Plan Seen as ‘Two Birds With One Stone’

Lee Young-gon, head of research at Toss Securities, said the two companies’ different choices reflect different regulatory environments under South Korea’s Fair Trade Act and the Financial Industry Restructuring Act. For SK Hynix, share buybacks and cancellations are highly favorable from a governance perspective. Under the Fair Trade Act, holding company SK Square Co. must maintain at least a 20% stake in subsidiary SK Hynix.

That stake recently fell to 20% after the issuance of American depositary receipts. If SK Hynix buys back and cancels shares, the total number of shares outstanding declines, naturally lifting SK Square’s ownership ratio. Lee said that gives SK Hynix a two-birds-with-one-stone effect.

Samsung Electronics faces the opposite problem. Under the Financial Industry Restructuring Act, Samsung Life Insurance Co. and Samsung Fire & Marine Insurance Co., both financial affiliates, cannot hold more than a combined 10% stake in Samsung Electronics. As of the end of June, their combined stake had already reached 10.00%, the legal ceiling. If Samsung carries out large-scale share cancellations, the reduction in total shares outstanding would push the affiliates’ ownership ratio above 10%, forcing them to sell Samsung Electronics shares into the market to avoid violating the law. That would create an overhang.

The ownership structure of the founding family may also have played a role. At SK Hynix, the owner family has almost no direct stake, aside from 3,620 shares that Chairman Chey Tae-won recently bought during a sharp drop in the stock. Whether the company raises dividends or cancels shares does not affect the family’s cash flow. Samsung Electronics is different. Executive Chairman Jay Y. Lee and other family members directly own shares, including Lee’s 1.67% stake. That means cash dividends would flow directly to the family and could be used to help fund large inheritance tax payments.

SK Hynix has been buying back about 650,000 shares a day since Aug. 20. That equals roughly 12% to 15% of average daily trading volume. Investors cite that demand support as one reason the stock has held up better than Samsung Electronics even on days when foreign and institutional investors were heavy sellers.

Samsung, meanwhile, has announced a shareholder return plan worth as much as 110 trillion won, but the immediate buying impact in the market is limited. The method for returning the remaining 60 trillion won to 80 trillion won has not been determined. Lee said SK Hynix stands to see the bigger short-term effect on trading flows because it chose buybacks and cancellations, which involve purchasing shares in the market every day and retiring them.

Some in the financial investment industry also voiced disappointment with Samsung Electronics’ investor relations communication, saying that announcing only the total size of the shareholder return plan was not enough.

One industry official said Samsung left too much room for interpretation by delaying details on the size and timing of any share buyback and cancellation, the issue investors wanted most clarified. “It makes you think, ‘Is this really the best Samsung can do on IR?’” the person said. “Samsung Electronics and SK Hynix are no longer companies confined to the Korean market. They are established global leaders. Their investor relations also need to meet global standards. The way to raise corporate value is to give investors information that is as specific and predictable as possible, and to communicate actively with the market.”

Kang Kyung-ju, Hankyung.com reporter qurasoha@hankyung.com