By Stephen Karmazyn, BA

Published: November 29, 2016

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Stephen Karmazyn, BA
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This Trigger Event Could Send Samsung Stock Soaring

Samsung StockIs Samsung Stock Heading to Rise? 

Samsung Electronics Co Ltd (KRX:005930) is instituting several important changes as calls from multiple parties are pushing for the company to part with more of its growing cash pile, restructure its governance, and appoint more diverse board members.

In what’s good news for Samsung stock, the company has begun to comply with some of the measures that international investors have been calling for, specifically by raising its dividends and planning to return any cash in excess of 70 trillion Korean won (US$59.8 billion) to shareholders. As of the end of September, the company had hit that $60.0-billion threshold, meaning that most of the profits for the remainder of 2016 should find their way into shareholder pockets, if all things go according to plan.

There is also an increased movement for the corporation to split into a holding company and an operating one. As The Wall Street Journal reports, “Samsung’s archaic shareholding structure, which has allowed the founding Lee family to maintain control within the group, is a major reason for Samsung’s depressed valuations.” (Source: “Samsung Keeps Investors Waiting for Big Move,” The Wall Street Journal, November 29, 2016.)

This restructuring could help with the governance issue faced by Samsung stock.

U.S. activist hedge fund Elliott Management Corporation has also thrown its hat into the ring, echoing many calls for restructuring and also providing several ideas of its own, such as Samsung returning 75% of its profits each year after capital expenditures. (Source: “Samsung Electronics Says It Will Consider Restructuring,” The Wall Street Journal, November 29, 2016.)

“We view the plan outlined by Samsung to be a constructive initial step,” Elliott Management said in a statement. “We anticipate more meaningful changes following the company’s corporate structure review.”

Overall, 2016 hasn’t been the greatest year for Samsung stock. The most notable problem was the exploding “Galaxy Note 7” smartphone, which cost the company $5.0 billion and hurt projections after the device was subjected to a total recall.

But, with what is being widely touted as steps in the right direction, things might be looking up for Samsung stock heading into 2017.