Samsung Electronics Co and its vice chairman Lee Jae-yong, at the helm while his father, Lee Kun-hee, is in hospital, are facing rising pressure from investors for broad change at South Korea’s most valuable company.
Samsung executives and Elliott Management Corp have been talking with investors in the US and South Korea to sound out opinions on the activist investor’s proposals to overhaul the Suwon, South Korea-based technology giant, people familiar with the matter said.
Shareholders are voicing dissatisfaction with the “status quo” after Samsung’s smartphone battery crisis that will cost at least US$6 billion and has seen its offices raided twice as part of a widening political scandal in the nation.
Elliott, led by billionaire Paul Elliott Singer, has proposed that Samsung Electronics improve its corporate governance by adding three independent board members, list shares on a US exchange, pay shareholders a special dividend of 30 trillion won (US$25.63 billion) and separate into an operating company and a holding company. Investors are beginning to express support for Elliott’s ideas not just in private meetings, but also in public.
“We agree with Elliott’s proposals,” said Daniel O’Keefe, managing director of Artisan Partners and co-founder of the Artisan Global Value Team.
“We think Samsung in its current structure faces certain existential threats. Its governance, board and management structure is not well-suited to the rapidly changing and highly competitive technology industry. Its board of directors has no truly independent members with experience in global operations, technology and capital allocation,” he said.
Samsung, which has said it plans to respond to Elliott’s proposals by the end of this month, declined to comment for this story.
Artisan holds more than 1 million Samsung Electronics shares and has owned stock in the company for more than a decade, according to data compiled by Bloomberg.
The Milwaukee-based company said Samsung’s recent missteps, including the fire-prone Note 7 smartphone that was pulled from the market last month, demonstrate that the company needs change to compete with Apple Inc, Google parent Alphabet Inc and other rivals.
“Samsung has struggled over the past few years in its mobile business, most recently with the Note 7 fiasco, and we believe there is a link between poor governance and this poor performance,” O’Keefe said.
“Secondly, Samsung suffers from a significant valuation discount relative to its peers. We think this is a function of the poor governance we just mentioned, as well as poor capital allocation and a lack of global liquidity in its shares which currently only trade in Korea. In the technology industry, a robust valuation is a competitive advantage,” he said.
Artisan is not the only shareholder that is coming out publicly in support of Elliott.
“We certainly think that there is a lot of merit in what Elliott is saying,” Aberdeen Asset Management Asia corporate governance director David Smith said. “What’s important to us is that these are win-win solutions.”
Aberdeen thinks that Samsung can afford to return more profit to investors through dividends.
“Certainly Samsung’s cash flow is very strong and balance sheet is very, very healthy,” Smith said. “Could they afford to pay out more? Sure. I would say in the absence of that, they should make a pretty good case of what they are investing in and why.”
He said that Aberdeen has been a long-term investor in Samsung for more than 15 years.
“We have had a continuous dialog with the group over that entire period, which would include some of these issues,” Smith said.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts