Samsung Electronics Retail Holders Urge $26.7 Billion Buyback, US ADR Listing

Samsung Electronics Co. retail shareholders have urged the company to buy back shares equal to 2.5% of its market value and then list American depositary receipts, or ADRs, in the US. The proposal aims to reduce the number of shares in domestic circulation while seeking a fresh valuation in US capital markets. The shareholders also called for approval at a general meeting before any treasury shares are used in the process.

Act, a retail shareholder platform, said on July 24 that it had sent a shareholder letter outlining the proposal to Samsung Electronics' board. In a vote held on Act's platform on whether the company should review an ADR listing, 94.1% of participating shareholders supported the plan. A total of 548 shareholders, whose holdings were verified through MyData, electronically signed the letter. Together, they own 311,897 Samsung Electronics shares.

Act's proposal calls for Samsung Electronics to repurchase about $26.7 billion of its own shares, equivalent to roughly 2.5% of its market capitalization, place those shares in trust and then issue ADRs in the US market.

Act argued that a large-scale buyback that reduces the domestic free float could have an effect similar to share cancellation. Issuing ADRs backed by treasury shares purchased by the company would also allow Samsung Electronics to be valued in the same market as its global competitors.

The platform also stressed that any use of treasury shares should be subject to shareholder approval at a general meeting. Under revised commercial law that took effect in March, treasury shares acquired by a company must in principle be canceled within one year, and any continued holding or disposal requires shareholder approval. On that basis, Act said disposing of treasury shares for the purpose of issuing ADRs should also require shareholder consent.

Act also said the board should not decide on large incentive payouts using treasury shares on its own. Because such matters could involve major capital transfers, they should be reviewed transparently at a shareholder meeting, it said.

Lee Sang-mok, Act's chief executive, said the principle is straightforward: whether it is an ADR listing aimed at a global re-rating or a large incentive payout, any major decision involving the large-scale use of shareholders' assets should require direct consent from shareholders, the company's true owners.

Act said it plans to send mailers to Samsung Electronics retail shareholders explaining how to coordinate voting rights once it completes procedures to inspect the shareholder register. It intends to consolidate voting rights scattered among retail investors and move to exercise shareholder rights.

Kim Dae-young, Hankyung.com reporter kdy@hankyung.com