Samsung Electronics Tumbles From Record, Stoking Anger Among 5 Million Retail Investors

Why Public Opinion Turned Against the Union

Debate Over Peak Chip Profits Added Pressure

Criticism Intensified as the Stock Slumped

Samsung Electronics Co.'s labor union failed to win broad public support for its bonus demands in large part because the stock's sharp drop shattered hopes that it would climb to 300,000 won. With the broader market already in a correction, the prospect of a general strike drew backlash from Samsung Electronics shareholders, pension investors holding semiconductor exchange-traded funds and other participants in South Korea's stock market, undermining support for a walkout.

As of the end of last year, Samsung Electronics had 4,605,714 shareholders, according to the Korea Securities Depository. Of those, 4,195,927 were retail investors, the company's annual report showed. The stock surged from 119,900 won at the end of last year to around 290,000 won recently, likely drawing many new investors this year and pushing the shareholder count to about 5 million. The number rises sharply when indirect holders are included, such as investors in 221 ETFs that own Samsung Electronics through retirement pension accounts and other vehicles.

Shareholders grew increasingly uneasy about a selloff as the union demanded bonuses based on the company's large operating profit. Samsung Electronics shares climbed to 299,500 won on May 15 before falling sharply from May 18. The decline came as investors were already debating in the US whether global semiconductor profits had peaked, and strike risk at Samsung added to the pressure on the stock. After the union announced on May 20 that negotiations had broken down, the shares slid from the 280,000-won range to the 260,000-won range in about 10 minutes.

Many retail investors who joined the rally late were pushed into losses. On May 15, when the stock hit a record high, retail investors were net buyers of 2.87 trillion won ($2.08 billion) of Samsung Electronics shares. The same day, they poured another 79.9 billion won ($57.9 million) into TIGER Semiconductor TOP10, the largest semiconductor-themed ETF holding Samsung Electronics.

The deterioration in sentiment toward the semiconductor sector also dragged down shares of chip materials, parts and equipment makers. Hanmi Semiconductor fell 10% for three straight trading sessions. ETFs including KODEX AI Semiconductor Core Equipment, down 16.59%, and SOL AI Semiconductor Materials, Parts and Equipment, down 14.72%, also dropped more than 10%. The selloff weighed on the Kospi as well. In effect, the strike risk hit not only Samsung Electronics' direct and indirect shareholders, but investors across South Korea's stock market.

Criticism has also persisted that shareholders were excluded from the debate over profit distribution. If a fixed portion of operating profit is paid as bonuses, the dividend available to shareholders could shrink. Based on last year's dividend of 1,668 won a share, the current dividend yield has fallen to the 0.5% range. To restore it to a more typical 2% range, the dividend would have to rise roughly fourfold. Investors fear that if more profit is allocated to employees, the company will not be able to increase dividends enough.

Jin-kyu Kang