Key points
- Every common share Samsung cancels can force its own insurers to sell stock they already hold.
- Samsung Life and Samsung Fire already sit right at the 10% ownership limit set by Korean law. Canceling shares pushes them over it automatically.
- Samsung can still do a buyback, but the limit is why dividends and preferred-share cancellations are the easier path.
- SK Hynix has the opposite problem. Its top shareholder must hold at least 20%, so canceling shares actually helps it.
Samsung Electronics didn't announce a common-share buyback and cancellation on Friday because doing so could force two of its own insurers to sell. Samsung Life Insurance and Samsung Fire & Marine sit at the 10% ownership threshold set by Korean financial-industry law. When Samsung cancels common shares, the total share count falls, and the insurers' combined stake rises automatically, even though they haven't bought anything.
Samsung Electronics closed down 8.7% at 257,000 won ($186 USD) Monday, extending a selloff that was already underway earlier in the session. A lot of the reaction online focused on what Friday's record shareholder-return plan didn't have, a big common-share buyback like the one SK Hynix announced five days earlier.
Why each cancellation can force a sale
The rule comes from Korea's Act on the Structural Improvement of the Financial Industry. It requires approval from the Financial Services Commission before a financial company controls 10% or more of another company's voting shares in the same business group.
Samsung Life owned 8.51% of Samsung Electronics and Samsung Fire owned 1.49%, exactly 10% combined. When Samsung Electronics canceled about 73.4 million common shares earlier this year, the two insurers had to sell stock first, so their combined percentage wouldn't cross the line once the cancellation went through. Samsung Life sold about 6.24 million shares and Samsung Fire sold about 1.09 million, both in block trades.
The cancellation then brought the two insurers' stakes right back to the same 10% line. Do it again at scale, and the same thing happens. Samsung Life and Samsung Fire either sell more shares or wait on regulatory approval.
Samsung has confirmed only one piece of its payout so far, a 30 trillion won ($21.7B USD) dividend due in the third quarter. The other 60 to 80 trillion won ($43.4B to $57.9B USD) is still undecided. Kim Soo-hyun, head of research at DS Investment & Securities, expects the 10% rule to shape how that gets split when the board decides by January. "Because Samsung Life's and Samsung Fire's common-share ownership in Samsung Electronics is set at 10%, further common-share cancellation would push both companies' stakes over the limit," he said. He estimates only 10 to 20 trillion won ($7.2B to $14.5B USD) goes toward buyback and cancellation, with dividends absorbing the other 50 to 60 trillion won ($36.2B to $43.4B USD).
Why SK Hynix has the opposite problem
SK Hynix doesn't run into this. Its biggest shareholder, the holding company SK Square, has to hold at least 20% of SK Hynix under a different Korean law, the Fair Trade Act. When SK Hynix cancels shares and the share count shrinks, SK Square's ownership percentage rises too, but that helps it clear the 20% floor instead of threatening to break through a ceiling.
Samsung's cancellations push its insurers toward a limit they can't cross. SK Hynix's cancellations push its biggest shareholder further above a limit it has to clear. That difference is a real part of why SK Hynix could commit to a full 40 trillion won ($28.9B USD) buyback and cancellation without much hesitation, while Samsung's board is still working out how much its own insurers can actually absorb.
Why preferred shares might do more of the work
Samsung has one way around the problem, buying back and canceling preferred shares instead of common ones. Preferred shares don't carry voting rights, so they don't count in the 금산법 math at all. Canceling them wouldn't force Samsung Life or Samsung Fire to sell anything.
Kim thinks preferred shares will take on a bigger share of any buyback because of this. Samsung's done it before. In 2015, when the price difference between its common and preferred shares was unusually wide, the company put about 30% of that year's buyback into preferred shares. Kim says that difference is wide again now, with Samsung's common-share premium sitting at 36%, the top of its historical range, which he called excessive.
It's not a full fix. Canceling preferred shares doesn't shrink the number of common shares actually trading, which is the part that raises common shareholders' ownership stake the most. That's the version of a buyback the market wanted, and it's the one Samsung's own structure makes hardest to deliver.
None of that changed how Monday felt for Samsung's own shareholders. The number of people holding under 1% of Samsung Electronics has nearly doubled in six months, from 4.19 million in February to 7.97 million by the end of June. A shareholder group called ACT put it plainly. "Samsung's investment and employee compensation plans go out to 2040 and 2035, but only the shareholder-return plan is empty after 2027," the group said.
Sources
- 연합뉴스, on Kim Soo-hyun's report, the buyback estimate and the preferred-share analysis
- 서울경제, on the March 2026 block-sale precedent and the SK Hynix comparison
- 조선일보, on Monday's close, the small-shareholder count and the ACT statement
- Korea's Act on the Structural Improvement of the Financial Industry, the underlying legal text
Won-to-dollar conversions use Monday's exchange rate of 1,382 won per dollar. The analyst comment and the ACT statement are translated from Korean. This is not investment advice.
