Industry watchers interpreted the recent rise of Samsung Electronics’ stock as both a vote of confidence from investors and another step in their recently adopted strategy to pressure the South Korean tech giant into increasing shareholder value. This latest turn of events was initially set in motion in October when the US hedge fund, Elliott Associates proposed that the company splits into two and takes other measures to unlock shareholder value in the short term. As a minority shareholder of Samsung Electronics, Elliott Associates believes the firm’s stock is massively undervalued. Representatives of the US hedge fund said that the company’s shares are undervalued by as much as 70%, which is why they’ve requested a change in its corporate structure which they deem the main culprit responsible for this state of affairs.
Following Elliott Associates’ request, Samsung promised a number of steps to increase shareholder value, including increased dividends and a $9.8 billion investment in buying back its stock. The latter measure is expected to be completed over the course of this year and will mark the largest buyback in the history of the Seoul-based company. Regardless, Samsung’s investors are still not entirely pleased and are pressuring the company into adopting an even more proactive approach to increasing shareholder value. That’s especially true for retail investors who don’t have the means to communicate with Samsung Electronics directly like Elliott Associates does. However, industry watchers are interpreting the recent rise in the company’s stock as precisely that – a statement from the firm’s retail investors who believe that Samsung’s operations are heading in the right direction but would still like to see a better return on their investment.
While Samsung Electronics is still officially considering the proposal to split into two, the company likely won’t make any radical changes to its corporate structure unless pressured, which is what both its minority shareholders and other investors are currently doing. In overall, 2017 is bound to be an exciting year for the South Korean tech giant that bounced back from the Galaxy Note 7 fiasco in record time and is already looking towards the future, backed by an extremely promising earnings guidance that’s predicting a 50% annual increase in the company’s Q4 2016 profits.