Samsung Electronics’ Seocho headquarters (left) and SK hynix’s Icheon headquarters. Yonhap News
Samsung Electronics (005930.KS) and SK hynix (000660.KS), whose share prices have halved from their previous highs despite a semiconductor super cycle, have moved to defend their stock. Through its earnings release, Samsung Electronics formalized the possibility of additional shareholder returns, including a special dividend and share buybacks and cancellations. SK hynix is also expected to unveil a new shareholder return plan in early August, when legal restrictions related to its American Depositary Receipt (ADR) offering are lifted. Chey Tae-won, chairman of SK Group, added support to the share price by personally buying 4.8 billion won worth of SK hynix stock — effectively the largest amount he could purchase immediately without prior disclosure.
According to the Korea Exchange on the 31st, Samsung Electronics shares closed at 207,000 won the previous day. Compared with its most recent high of 374,500 won, that marks a 44.7% decline. SK hynix also plunged 55.7%, from its previous high of 2,987,000 won to 1,322,000 won.
Both companies are setting new record earnings, but their share prices have moved in the opposite direction. Having quickly priced in the outlook for the artificial intelligence (AI) semiconductor market, the stocks surged in a short period, and that burden combined with profit-taking and valuation debates. As earnings alone became insufficient to justify share prices, analysts say the two companies have begun to play the shareholder return card.
Samsung Electronics said in its second-quarter earnings conference call the previous day that it is discussing additional shareholder return measures this year, including a special dividend. The company explained, “The board and management are currently actively discussing concrete implementation plans for shareholder return policies, including a special dividend this year,” adding, “We are also conducting in-depth discussions on the next shareholder return policy.”
Under a three-year shareholder return policy applying from 2024 through this year, Samsung Electronics pays a total of 9.8 trillion won in regular dividends annually. On top of this, there is speculation that adding a special dividend or share buybacks and cancellations could provide a safety net for the sharply fallen share price.
The company is also reviewing a plan to conduct share buybacks for both employee compensation and shareholder returns in parallel. Samsung Electronics said, “The buyback and cancellation of treasury shares for shareholder return purposes will also proceed in accordance with relevant laws and board resolutions and other necessary procedures,” adding, “We will determine the optimal implementation plan by considering both the enhancement of shareholder value and the effect of employee compensation.”
SK hynix is also weighing additional return measures. However, due to restrictions under securities law that apply during its U.S. ADR listing process, it is difficult to disclose specifics immediately.
Chey Tae-won, chairman of the Korea Chamber of Commerce and Industry, answers questions at a press conference during the KCCI’s 49th Jeju Forum held at The Shilla Jeju on the 15th. KCCI
According to the financial investment industry, a listed company that conducts an initial public offering by issuing new shares on the U.S. stock market is subject to a prospectus delivery obligation for a certain period after listing. Rule 174, a regulation of the U.S. Securities and Exchange Commission (SEC), sets the prospectus delivery period for an exchange-listed IPO at 25 days after the offering date.
If a company newly announces material information not included in the prospectus during this period, such as large-scale share buybacks or special dividends, the risk of disputes or class-action lawsuits over the adequacy of the offering prospectus could increase. While Rule 174 itself does not uniformly prohibit new announcements by companies, the explanation is that it is common practice for issuers to refrain from announcements that could affect the market, given the potential for liability under U.S. securities law.
SK hynix’s ADR began trading on July 10 U.S. local time. Accordingly, the 25-day prospectus delivery period ends around August 4 U.S. local time. The point at which SK hynix can announce a concrete shareholder return policy is also expected to effectively come after this period ends.
Kim Woo-hyun, SK hynix’s chief financial officer (CFO and executive vice president), said in the second-quarter conference call on the 30th, “We are currently reviewing various forms of additional shareholder return measures,” while remaining reticent about the method, scale and timing.
Kim explained, “Due to regulatory and procedural constraints related to the ADR offering, there are certain limitations on providing additional new material information at this point that was not disclosed during the offering process.” He added, “As soon as concrete measures are finalized, we will prepare to share them with the market within the year.”
Chey moved to contain the situation by buying shares himself. Chey purchased 3,620 common shares of SK hynix on the open market. Based on the previous day’s closing price, the purchase amount was about 4.79 billion won. This is the first time Chey has held SK hynix stock in his own name.
The purchase size falls below the 5 billion won threshold that triggers a prior disclosure requirement for stock transactions by executives and major shareholders of listed companies. To trade 5 billion won or more in shares, one must disclose the plan 30 days in advance. Chey effectively picked up the maximum amount he could buy immediately without a separate prior disclosure.
SK Group described the purchase as “a way of practicing responsible management.” In the market, there is an assessment that Chey demonstrated his confidence in the sharply fallen SK hynix share price not with words but with his own money.