Two Samsung insurance companies held 9.9999 percent of Samsung Electronics’ common stock in August, one ten-thousandth of a percentage point under the legal limit.
On Thursday Samsung Electronics reported 107.44 trillion won of quarterly operating profit, about $80 billion, and said it was the first tech company anywhere to clear 100 trillion won in a quarter. Ninety-nine percent of it came from the chip division. The board approved a dividend of 4,601 won a share, about 30 trillion won in total and more than twelve times what it paid in each of the first two quarters. The stock closed down 4.13 percent, and Reuters Breakingviews faulted the company for staying silent on what comes next.
What investors keep asking for is buybacks — the company buying its own shares and cancelling them. The catch is a Korean law that bars a group’s financial companies from holding 10 percent or more of a sister company’s voting shares without regulators’ approval. As of June, Samsung Life and Samsung Fire & Marine held 8.51 and 1.49 percent.
Cancel common shares and the denominator shrinks, the insurers’ combined stake tips past 10 percent, and they have to sell. The Korea Herald spelled out in August what selling would mean: a smaller bloc of affiliated shareholders and potentially less influence for the founding Lee family. A dividend avoids all of it. The insurers get cash, and 30 percent of their domestic dividend income is tax-exempt. Samsung Life alone held about 501 million shares in August, which works out to roughly 2.3 trillion won from this one payment.
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What’s odd is how much has cleared outside the factory. There is a route around the cap, and on Thursday Samsung edged toward it. Preferred shares carry no vote, so cancelling them leaves the 10 percent test untouched. An activist fund, Life Asset Management, urged exactly that in September; on October 1 Samsung’s response was noncommittal, citing fairness to common shareholders. On Thursday the company said it is “committed to actively considering and adjusting” the balance between the two classes, and its finance chief said the preferred share of buybacks would follow market conditions. Between 55 and 75 trillion won of this year’s returns is still unallocated.
A buyback changes who owns what. A dividend pays everyone and moves no one’s percentage. At 9.9999 percent, the percentage is the part that can’t move.
The $3 Trillion Crisis That Almost NOBODY Is Talking About
According to Wall Street legend Dr. Martin D. Weiss, there’s a $3 trillion financial crisis happening right now.
And almost nobody but him is warning people.
In fact, according to WSJ, this $3 trillion market “is under growing strain, despite industry’s upbeat tone.”
Weiss says the biggest danger is NOT just another stock market crash.
The biggest danger is NOT only a major bank failure.
Rather, it’s a chain reaction of crashes and failures across the globe.
A dividend pays everyone and moves no one’s percentage.
