As Samsung Electronics remained cautious over US hedge fund Elliott’s proposal on governance restructuring, stock prices of the tech giant and related affiliates surged Thursday.

Earlier Wednesday, Elliott sent a letter to Samsung Electronics, noting that the “unnecessary complex” structure of the company was weighing on its stock prices and it is thus undervalued by as much as 70 percent.


The activist investor asked Samsung Electronics to split into a holding company and list its operating company on the Nasdaq stock exchange. It also requested Samsung pay shareholders a $27 billion special dividend.

“We will prudently review the shareholder’s letter,” a Samsung Electronics’ spokesperson said, without making further comments.

Following the reports, stock prices of Samsung Electronics surged on expectations the company may streamline its structure.

The share prices traded at 1.69 million won ($1,520), up 4.57 percent from the previous day. It also touched a record high of 1.7 million won in the morning.

“The Elliott’s proposal has reaffirmed the positive side in terms of Samsung Electronics’ non-business assets, or cash assets,” said Kim Sun-woo, an analyst at Meritz Securities.

“Samsung Electronics is expected to speed up shareholder-friendly policies and the stock prices will see a solid rise in the process,” Kim added.

The stock prices of Samsung C&T Corporation, the de-facto holding company of Samsung Group, also rose 7.89 percent, and Samsung SDS, in which Vice Chairman Lee Jae-yong holds a 9.2 percent stake, rose 0.62 percent.

“The stock prices of Samsung Group’s key affiliates will also gain momentum on expectations of the group’s restructuring,” said Lee Sang-hun, an analyst from HI investment & securities, picking Samsung Electronics, Samsung SDS and Samsung C&T Corporation as the biggest beneficiaries.

“Samsung C&T Corporation is especially in an advantageous position since it is on a path to control the group with Lee Jae-yong’s solid dominance,” Lee added.

Market analysts gave a positive outlook on Elliott’s proposal, saying it could be a good opportunity for Lee to streamline the structure while raising the dominance of the ownership family.

“The changes needed for Samsung’s restructuring are mostly stated on Elliott’s proposal. It is like Elliott has provided a pretext for spin-offs and changes in holdings, which Samsung may find it difficult to push itself,” said Yoon Tae-ho, an analyst at Korea Investment & Securities.

“(The proposal) will likely be a clue to the corporate governance rather than a source of conflict for both sides,” Yoon added.

By Shin Ji-hye (shinjh@heraldcorp.com)