Samsung Electronics to step up share buybacks to fund chip bonus
Seoul, May 21
Samsung Electronics is expected to increase treasury share buybacks to fund a special bonus for semiconductor employees under a tentative labour agreement reached to avoid a planned strike, according to a report by The Korea Herald on Thursday.
As per the report, the company has agreed to provide a semiconductor performance bonus equivalent to 10.5 per cent of business performance earnings. The bonus will reportedly be paid in treasury shares over the next 10 years without any cap.
The report said Samsung Electronics currently holds around 82 million common treasury shares, based on year-end disclosures and subsequent buybacks and sales. However, these holdings may not be enough to meet the proposed bonus payout requirements, leading to expectations of additional share buybacks.
According to market estimates cited in the report, if Samsung Electronics records cumulative operating profits of 300 trillion won (USD 200 billion) this year, the company may need to provide nearly 31.5 trillion won (approx. USD 21.5 billion) worth of treasury shares as bonuses to employees in its Device Solutions division, which includes memory chip operations.
The report further noted that Samsung Electronics' current treasury share holdings are valued at about 22.65 trillion won (approx.. USD 15.5 billion) based on Wednesday's closing price, which would fall short of the estimated bonus requirement.
Samsung Electronics has been retiring treasury shares in recent years to improve shareholder returns. This year alone, the company plans to retire around 87 million treasury shares in the first half, including 73 million common shares and 13.6 million preferred shares announced for cancellation on March 31, the report added.
With treasury share holdings expected to decline further after these cancellations, the report said concerns over management control and the need for additional buybacks are increasing.
A Samsung Electronics official was quoted in the report as saying that the company would move to buy back shares if necessary.
Samsung Electronics shares were trading at 295,000 won (approx. USD 204) on KOSPI at 12:20 p.m., up 6.97 per cent from the previous session, according to the report.
— ANI
Reader Comments
This is brilliant! Samsung is basically rewarding its chip engineers with shares that could appreciate massively if the company does well. It's like giving them a piece of the pie. Meanwhile, in India, we're still debating basic salary structures for IT employees. Big tech companies in the West and Korea set such high standards for employee wealth creation. 👏
I'm a bit skeptical about this. If Samsung needs to buy back more shares to fund these bonuses, isn't that just increasing the total share count and potentially diluting existing shareholders? As an investor, I'd want to see clearer details on how this affects per-share value. The 6.97% stock jump today might be short-term euphoria. 🤔
As someone who has family in the semiconductor industry in Bengaluru, I can tell you that employee bonuses tied to company performance is huge here too. But 10.5% of earnings as bonus for 10 years? That's exceptionally generous. No wonder Samsung's chip division attracts top talent globally. India needs to foster similar incentive structures in our semiconductor push under the PLI scheme. 🇮🇳
From a Western investor's perspective, this seems like an innovative way to avoid a strike while managing cash flow. But the math is concerning: needing $21.5 billion in shares for bonuses when you only have $15.5 billion currently? That's a significant gap. I wonder if Samsung will need to issue new shares or take on debt to fund additional buybacks.
Really smart labour negotiation tactic by Samsung management. By offering shares instead of cash, they're betting on future growth AND
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