A bright beacon of light just shone for Samsung Electronics Co Ltd amidst all the troubled times it has been facing of late. The South Korean company has added almost $9 billion to its market value on Wednesday as company stock soared to record heights.
It is actually quite interesting. Just a couple of days ago, there were reports of U.S. activist hedge fund Elliott Management pressurizing Samsung to split itself into two. That seemed to have jolted Facebook into action and the company has been suggesting all sorts of alternatives. The South Korean giant is planning to return 50 percent of its free cashflow in 2016 and 2017. What’s more, the company also offered a 36 percent rise in total 2016 dividends for investors.
The company is also planning to expand share buyback after completing the current round of buybacks which are worth almost $9.8 billion. All this, along with the company’s promise to review corporate structure, bring in experts to run the business seem to have bolstered shareholder confidence. Samsung stock which is worth around $224 billion in total, climbed almost 4.2 percent to reach a per share price of 1.747 million won ($1,496.74).
Elliot, which had originally asked Samsung to pay out 30 trillion won in special dividends and return 75 percent of free cashflow, called the steps taken by the company as a “constructive initial step”. However, it is not easing off any of its pressure just yet.
Meanwhile, Samsung seems to be making up its mind to go for a holdings company structure. In case you are unaware of it, the structure consists of a central company that holds significant stakes in different companies of the group. A relevant example of a holdings company structure is India’s Tata Group. Such a transition is expected to significantly benefit the founding Lee family heirs, who are expected to be able to leverage it to increase their control over the Samsung Group.
Well, at least something good happened to Samsung after all those exploding phones and washing machines. Lets hope its a sign of a return to good times for the South Korean behemoth.