Yesterday, a major US hedge fund called Elliott Associates sent a proposal to Samsung explaining why it thinks that the company should be split up and listed on the Nasdaq to create greater shareholder value. Investors appear to like what the hedge fund has proposed as Samsung Electronics shares rose almost 5 percent from the previous day buoyed by the news. Elliott’s affiliate companies Blake Capital and Potter Capital have a combined holding of 0.62 percent in Samsung Electronics.
“Elliott is one of Samsung Electronics’ shareholders, and we will carefully consider a shareholder’s request,” Samsung has said in an official statement. This obviously doesn’t mean that the conglomerate is going to accept the hedge fund’s demands, its response to the proposal can be considered mild at this stage. Elliott Associates has called on Samsung to split the company into holding and operating units and to list them on the Nasdaq in the US. It has also called on the company to pay dividends worth $27 billion to shareholders in order to increase shareholder value. Samsung cash reserves recently hit a record high of $69 billion even though it has completed a $10 billion share buyback program initiated for the sole purpose of creating more value for shareholders.
This isn’t the first time Elliott Associates has tried this form of shareholder activism. Just last year it lost a bitter public shareholder war with Samsung’s founding Lee family. It’s of the view that Samsung is undervalued by nearly 70 percent and that these moves will eliminate the unnecessarily complex corporate structure as well as generate better value for the shareholders.
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