A South Korean hedge fund is escalating pressure on Samsung Electronics by urging the company to buy back and cancel its preferred shares, positioning itself among the first investors to actively push for this strategy to boost the tech giant's valuation. Life Asset Management has formally submitted its request through a letter to Samsung's board and management this week, calling for the repurchase and cancellation of these securities until their price gap with common shares is completely eliminated.

While the fund has not disclosed the size of its stake in Samsung, Life Asset is demanding that the board consider this proposal at its October meeting and complete the cancellation process by December. The aggressive stance suggests that additional shareholder pressure may be mounting on Samsung in the near future, particularly as the company has recently unveiled an ambitious plan to return up to 110 trillion won ($81.7 billion) to investors this year, capitalizing on the artificial intelligence-driven profit surge.

The widening discount on preferred shares compared to common stock has become a central focus for those monitoring the company's shareholder return program. The Seoul-based hedge fund argues that up to 73 trillion won from the total shareholder return package should be allocated specifically for share buybacks, after accounting for special and regular dividends. Currently, Samsung's preferred shares are trading at a discount exceeding 25% relative to its common shares.

Market analysts anticipate that Samsung will channel a significant portion of its buyback activity toward preferred shares, as this approach offers greater cost efficiency. According to Life Asset's calculations, Samsung could cancel 1.36 preferred shares using the same capital required to retire one common share. The fund, which manages approximately $4 billion in assets, emphasized that steering clear of common share buybacks would also help Samsung avoid regulatory complications that could force affiliated companies to reduce their holdings.

South Korean law restricts financial affiliates from owning more than 10% of voting common shares, a constraint that makes preferred share repurchases a more strategically viable option for the semiconductor heavyweight. This regulatory framework, combined with the substantial price disparity, creates a compelling case for prioritizing preferred shares in the company's buyback execution strategy.