Samsung Electronics Co. Ltd. saw its shares soar 9.8% on Wednesday, closing at 340,500 won, after the company announced it is considering a share buyback to fund stock-based compensation for employees. The move has reignited investor interest in the South Korean tech giant, which had suffered a steep decline earlier in the week.
According to local media reports, the proposed buyback could amount to as much as 90 trillion won, equivalent to approximately 264 million common shares based on Wednesday's closing price. That represents about 4.5% of Samsung's total common shares outstanding as of the end of March, which stood at 5.92 billion shares. The potential buyback volume is nearly five times Wednesday's trading volume of 53.4 million shares, highlighting the scale of the plan.
The announcement comes after a turbulent week for South Korea's stock market. On Tuesday, the KOSPI index tumbled nearly 10%, driven by heavy selling in chip stocks, with Samsung and SK Hynix both dropping over 12%, triggering a 20-minute trading halt. However, the buyback news helped the KOSPI rebound sharply, closing 3.26% higher at 8,471.02.
Samsung's filing indicated that the company is evaluating a share purchase to support stock-based pay for staff linked to 2026 results, but it has not yet finalized the amount or timeline. The reported 90 trillion won figure would be about 9.2 times Samsung's annual dividend of 9.8 trillion won under its 2024-2026 shareholder return policy, which commits to returning 50% of free cash flow to shareholders.
It is important to note that this buyback differs from a traditional share cancellation. The repurchased shares would be held as treasury stock and used to compensate employees. Under the reported terms, employees could sell one-third of the shares immediately, another third after one year, and the remainder after two years. Any reduction, delay, or early selling by employees could weaken the stock's support.
The buyback has also shifted the competitive dynamics between Samsung and SK Hynix for South Korea's top market capitalization. SK Hynix had briefly surpassed Samsung on Monday, with a market value of 2,080.4 trillion won versus Samsung's 2,066.7 trillion won, driven by its leadership in high-bandwidth memory (HBM) chips used in AI applications. However, Samsung's rally on Wednesday pushed it back to the top spot. SK Hynix shares rose 1% on the day.
SK Hynix is also pursuing a major capital raise, planning to issue up to $29.4 billion in American depositary receipts (ADRs) on the Nasdaq, aiming to attract U.S. investors and secure a higher valuation. Analysts note that the AI boom is driving massive capital expenditure plans for both companies, with South Korea's presidential policy adviser Kim Yong-beom suggesting that Samsung and SK Hynix may need to build new chip plants more than a decade ahead of schedule.
Despite the positive momentum, some analysts caution that the rally is heavily tied to AI-related sentiment and cash flow sustainability. Chris Weston, head of research at Pepperstone, noted that recent tech selling was partly due to funds locking in gains from crowded AI positions. Michael Wan at MUFG highlighted that the key question remains whether AI cash flows can support the wave of new investments.
Looking ahead, investors are also watching Micron Technology's fiscal third-quarter results, due after the U.S. close on Wednesday, which could provide further cues for the memory chip sector.
