Samsung shares surge after surprise $7 billion share buyback

Samsung Electronics Co. shares surged after South Korea’s biggest company announced a surprise plan to buy back about 10 trillion won ($7.2 billion) of its own stock over the next year.

The stock rose as much as 7.3% in Seoul trading Monday, adding to a 7.2% jump Friday ahead of the news. The shares are still down about 27% this year amid concerns that its memory chip business has fallen behind in the artificial intelligence market.

Analysts expect the buyback to provide a catalyst for the stock, while some noted that it may also help the founding family tighten its grip. Shares of competitor SK Hynix Inc. have climbed about 24% this year on investor enthusiasm for its AI chips.

“The sudden buyback comes as a positive surprise to us, and we believe Samsung’s management is proactively aiming to prevent further share price decline,” JPMorgan Chase & Co. analyst Jay Kwon wrote in a research note. “We believe that the restructuring and strategy/action plan to regain tech leadership will be more critical for the share price over the mid-to-long term.”

In the first phase, Samsung will buy back about 3 trillion won of shares starting Monday and up till February 2025, all of which it will cancel. The board will deliberate how best to deploy the remaining 7 trillion won.

Sanghyun Park of Clepsydra Capital, notes that the buyback will help the founding family strengthen its control of the company by reducing shares held externally. He also notes it may help them with collateral issues on loans tied to inheritance tax bills.

“Local desks have been buzzing since last week about Samsung potentially pulling a short-term price pop to deal with the family’s collateral squeeze,” Park wrote in a note on Smartkarma. “The stock’s probably gonna camp comfortably above the 53,000 won margin call danger zone for a while.”