Samsung Just Promised $79 Billion. Why Did Investors Sell?

The News

On August 24, Samsung Electronics shares fell 8.7% after the company announced a record shareholder-return plan worth as much as 110 trillion won, or roughly $79 billion. The plan is five times bigger than Samsung's previous all-time high payout of 20.3 trillion won in 2020. Investors were hoping for more aggressive buybacks and sharper details on how the money is to be distributed.

Samsung expects to declare approximately 30 trillion won in cash dividends for the third quarter and has approved a 15-trillion-won buyback for employee compensation. The remaining 60-80 trillion will be determined based on Samsung's full-year results, with details to be determined in January 2027.

Context

Samsung's move comes as the industry enjoys an unprecedented boom. The surge in AI applications has created insatiable demand for memory chips in AI data centers, particularly in high-bandwidth memory. Samsung and its competitor SK Hynix have both benefited from the boom, recording historic profits and amassing significant cash reserves. This has put pressure on Korean tech firms to make larger buybacks and share cancellations.

Investors value initiatives such as large buybacks and share cancellations because they reduce the total number of shares outstanding and increase the proportion of the company owned by each investor. The timing was particularly crucial because SK Hynix announced a 40 trillion won (about $29 billion) buyback and cancelled plan just days earlier. SK Hynix also said it would spend more than 50% of the free cash generated between 2025 and 2027 on share buybacks. Samsung's plan was much larger in size, but investors were comparing the two companies' payouts. It was important for investors to understand what portion of Samsung's payout would go to buybacks and cancellations versus dividends.

Immediate Cause

The problem was that Samsung gave no commitment to the size of buybacks many investors were hoping for in its latest move. Although the company boasted of the 90-110 trillion won as its largest ever shareholder return in its history, only 15 trillion won of the currently announced repurchase is directly allocated to employee compensation.

Samsung did not announce the large common-share buyback and cancellation program that investors were hoping for. There is also another structural impediment to Samsung conducting massive buybacks of its common shares. Samsung Life Insurance and Samsung Fire & Marine Insurance, constituent companies of the Samsung Group, own approximately 10% of Samsung Electronics' common shares combined. Korean rules limit their holdings to 10%. If Samsung aggressively buys and cancels common shares, their proportional ownership could rise above the 10% limit, potentially forcing them to sell shares. Due to this restriction, analysts say there may barely be any money for common share buybacks and cancellations at all. About 10-20 trillion (about $7 billion) of the total shareholder return may be allocated to buybacks and cancellations, with the remainder going to dividends.

Effect

The immediate reaction demonstrated the extent to which investors valued the buyback and cancellation structure. Samsung Electronics Co. dropped 8.7% to close at 257,000 won on August 24. Notably, the decline was particularly surprising given that the stock had climbed considerably throughout 2026 as shareholders anticipated a rise in profits from a surge in semiconductor sales.

The disappointment also underscored the difference between Samsung and rival SK Hynix. While Samsung's buyback commitment was larger, SK Hynix's move was more directly weighted towards buybacks and cancellations. This meant that investors who wanted to benefit from the company's substantial cash build-up did not have to rely on dividends during the share buyback and cancellation program. Even so, it's worth noting that dividends are a considerable portion of the plan.

Samsung's move to pay out dividends might well satisfy many shareholders. That said, dividends do not reduce the number of shares outstanding. Unlike a significant buyback and cancellation program, they will have little impact on earnings per share.

Market Impact

Samsung's woes were not limited to the company's own shares. The KOSPI index fell 3.12 percent or 215.99 points to close at 6,696.96 on August 24. Trading volume was 264.9 million shares worth 26.1 trillion won ($18.9 billion). Foreign and institutional investors sold a combined 4.97 trillion won worth of shares. Samsung Electronics Co. dived 8.7 percent to 257,000 won, while the main rival SK Hynix dropped 3.41 percent to 1.671 million won.

It was a disappointing end to what had been a good year for Samsung as investors anticipated rising semiconductor profits, which would contribute to higher shareholder returns. The reaction also demonstrated the difference between Samsung and its rival. SK Hynix had announced a 40 trillion won ($29 billion) buyback and cancellation program, compared with Samsung’s 90–110 trillion won ($65-80 billion) total return program.

Notably, analysts expected barely 10-20 trillion won of Samsung's plan could potentially be allocated to buybacks and cancellations, compared to around 50-60 trillion that could potentially be allocated to dividends. The market reaction implies that shareholders were less concerned with the size of the shareholder return but rather the proportion that could potentially be devoted to buybacks and cancellations. With Samsung's shares down nearly 9 percent despite a record-large shareholder return announcement, it seems like buyback expectations could have been significantly higher than what the company announced.

So in short

Samsung's $79 billion shareholder-return plan was huge, but shareholders wanted much bigger buybacks. An 8.7% drop in Samsung's stock and a 3.12% drop in the KOSPI index reflect the disappointment of the market, underscoring the high expectations for Samsung's AI-driven profits.