U.S. hedge fund Elliott expresses confidence in Samsung

U.S. hedge fund Elliott expresses confidence in Samsung. October. 14, 2016 07:31. by 김지현기자, 이건혁기자 jhk85@donga.com,gun@donga.com.

U.S. hedge fund Elliott Management expressed confidence in South Korea’s embattled Samsung Electronics on Wednesday local time despite South Korean electronics giant’s decision to discontinue its fire-prone Galaxy Note7 smartphone. It was unusual for a hedge fund to issue a public statement in support of a particular company. Elliott recently demanded that Samsung appoint additional outside board directors.

“The recent issues surrounding the Galaxy Note7, while unfortunate, do not diminish our view that Samsung Electronics is a leading global technology company with a world-class brand,” two Elliott units, Blake Capital and Potter Capital, said in a statement. “We believe that the company’s forthcoming new leadership can build on the company’s initial response to this situation by adopting best-in-class operational and corporate governance improvements.”

The local business community interprets the statement as Elliott’s first message urging Samsung not to ignore its demands two weeks ahead of an extraordinary shareholders’ meeting that would vote on appointing Samsung’s vice chairman and heir Lee Jae-yong as a registered board director. Although the Elliott units appeared to support Samsung on the surface, the message is seen as a pressure on Samsung to accept their proposal to increase the tech giant’s shareholder value.

Elliott’s demand that Samsung divided into separately listed holding and operating companies and add three independent directors to their boards is viewed as the hedge fund’s intention to ultimately enter the board of Samsung Group’s holding company. The fund’s call on Samsung to get listed on the U.S. Nasdaq market is also seen as an attempt to hold sway over the appointment of Samsung’s top management.

Analysts say that Elliott’s call for a split of Samsung Electronics into listed holding and operating companies is close to a disguise for taking advantage of the limits of the Korean system that has not legal grounds for interim holding companies. They view Elliott intending to justify its demands and boost Samsung’s share prices.