Samsung Electronics’ Share Price Dip Triggers a 10 Trillion Stock Buyback Program
Samsung has announced plans to buyback shares worth $7.17 billion over the next year. The share buyback plan is aimed at boosting shareholder value after Samsung Electronics share prices plunged to a four-year low earlier this week.
According to Reuters, this is the first time the giant smartphone manufacturer is buying back shares since 2017. In total, the company plans to buyback 10 trillion shares. Out of these, 3 trillion shares will be bought back and canceled over the next three months.
A Phased Buyback Plan
Samsung Electronics board of directors authorized the share repurchase program. The company says the Samsung buyback program will be implemented in phases over the next year.
The first phase will commence on November 18, 2024, to February 17, 2025. The buyback will involve repurchasing 6.91 million preferred shares and 50.14 million common shares. The board of directors will be making a decision on strategies for enhancing shareholder value. This includes how and when to leverage the remaining 7 trillion shares in the buyback program.
Samsung’s buyback plans coincide with growing investor concerns regarding its memory chip business. The company’s memory chip unit is struggling to catch up with its smaller rival, SK Hynix Inc. In recent years, SK Hynix has become the main supplier of high-bandwidth memory to AI chip giants like Nvidia Corporation. Nvidia uses the top-notch chips in its popular AI accelerators.
Focus on Shareholders
Samsung’s stock repurchase program will help improve the company’s share performance and give shareholders value in the short term. However, analysts say the smartphone giant needs concrete plans to support share performance.
Park Ju-gun of Leaders Index says the share buyback plan is a reflection of the crisis that the chip giant feels due to the sharp drop in Samsung share prices. Last month, the company apologized to shareholders for reporting disappointing quarterly profits. The company trailed behind rivals in selling AI chips to Nvidia.
Samsung stocks featured among the worst performing in the leading global chipmakers category. The company has also been affected negatively by threats by President elect Donald Trump to increase tariffs on imports as that will affect demand for electronic products in the US.
Company Outlook
Samsung share prices gained 7.2% on Friday, November 15, 2024, after hitting their lowest price in four years on November 12, 2024. Analysts attributed the stock price decline to rising concerns over introduction of new US tariffs under the Trump administration.
This is the biggest jump since March 2020. The global smartphone maker continues to grapple with a consumer electronic slump. Investors are still cautious about the company’s outlook.
“A lower valuation is justified given trade risks around Korea and also the catch-up in HBM, which will take time, and a weak memory environment. There are better tech stocks to own here, most of them are in Taiwan,” Sat Duhra, Fund Manager at Janus Henderson Group said.
Last month, the company reported progress in qualifying and supplying advanced AI memory chips to Nvidia. It expects to ship HBM3E, its most advanced chips in quarter four of this year.
