Key Takeaways
- • Palliser Capital, the activist hedge fund, has urged Samsung Electronics to issue American depositary receipts (ADRs) in the US and use the proceeds to repurchase preferred shares, according to Bloomberg.
- • Samsung's non-voting preferred shares trade at a discount of more than 20% to its ordinary shares in South Korea, even after the company announced a record shareholder-return programme in August.
- • Palliser cites rival SK Hynix, whose US-listed ADRs trade at a premium of more than 40% to its domestic shares, as evidence of international investor demand.
- • Palliser estimates that more than $60bn in shareholder value could be unlocked across the South Korean market if listed preferred shares traded at parity with ordinary shares.
- • The campaign follows a similar call from Life Asset Management and extends to Hyundai Motor, whose preferred shares trade at a discount of nearly 50%.
Summary
Activist hedge fund Palliser Capital has called on Samsung Electronics to issue American depositary receipts in the United States and use the proceeds to repurchase preferred shares, aiming to narrow the valuation gap with the company's ordinary shares, according to a report by Bloomberg. Palliser founder and Chief Investment Officer James Smith outlined the proposal at the Sohn San Francisco Investment Conference on Tuesday.
Samsung's preferred shares currently trade at a discount of more than 20% to its ordinary shares in South Korea, despite the company announcing a record shareholder-return programme in August. Palliser proposed that Samsung issue ADRs at a premium to its Korean-listed shares and direct the proceeds toward additional preferred-share buybacks and cancellations. Smith pointed to rival chipmaker SK Hynix, whose US-listed ADRs trade at a premium of more than 40% to its domestic shares, as evidence of potential demand from international investors.
The proposal follows a similar call from Seoul-based hedge fund Life Asset Management, which urged Samsung last month to repurchase and cancel preferred shares until their valuation discount is eliminated. Palliser has also urged Samsung and Hyundai Motor, whose preferred shares trade at a discount of nearly 50%, to prioritise preferred-share repurchases within their shareholder-return policies and to set explicit targets for narrowing the gap.
According to Palliser, preferred shares in South Korea trade at an average discount of 46% to ordinary shares, compared with less than 5% in developed markets including the US, UK and Canada. Smith estimates that more than $60bn in shareholder value could be unlocked across the South Korean market if listed preferred shares traded at parity with their ordinary counterparts.
The campaign comes amid South Korea's ongoing Corporate Value-up programme, introduced in 2024 to improve corporate governance, capital allocation and shareholder returns. Palliser argues that narrowing preferred-share discounts should form the next stage of those reforms.
Samsung's preferred shares currently trade at a discount of more than 20% to its ordinary shares in South Korea, despite the company announcing a record shareholder-return programme in August. Palliser proposed that Samsung issue ADRs at a premium to its Korean-listed shares and direct the proceeds toward additional preferred-share buybacks and cancellations. Smith pointed to rival chipmaker SK Hynix, whose US-listed ADRs trade at a premium of more than 40% to its domestic shares, as evidence of potential demand from international investors.
The proposal follows a similar call from Seoul-based hedge fund Life Asset Management, which urged Samsung last month to repurchase and cancel preferred shares until their valuation discount is eliminated. Palliser has also urged Samsung and Hyundai Motor, whose preferred shares trade at a discount of nearly 50%, to prioritise preferred-share repurchases within their shareholder-return policies and to set explicit targets for narrowing the gap.
According to Palliser, preferred shares in South Korea trade at an average discount of 46% to ordinary shares, compared with less than 5% in developed markets including the US, UK and Canada. Smith estimates that more than $60bn in shareholder value could be unlocked across the South Korean market if listed preferred shares traded at parity with their ordinary counterparts.
The campaign comes amid South Korea's ongoing Corporate Value-up programme, introduced in 2024 to improve corporate governance, capital allocation and shareholder returns. Palliser argues that narrowing preferred-share discounts should form the next stage of those reforms.
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