Samsung is rebounding after a sell-off: the company announced a $59 billion buyback

Samsung Electronics shares jumped 9.8% on June 24, partially recovering from Tuesday’s decline: the day before, the tech giant’s shares had plummeted more than 12% amid a sell-off in the technology sector. The rally was driven by news of a massive buyback: the memory chip maker is considering a share buyback worth about 90 trillion won ($58.61 billion), Reuters reports, citing the South Korean news agency Yonhap and its industry sources.

The company took this step after agreeing, during recent negotiations with employees, to pay them bonuses in the form of stock. Details of the plan may be announced shortly.

The current rebound, according to Reuters, has allowed Samsung to overtake its competitor SK Hynix in terms of common stock market capitalization (SK Hynix shares rose 0.9% on June 24, slightly recovering from the 12% drop the previous day). As a result, Samsung has regained its status as South Korea’s leader in terms of common stock market capitalization, the agency noted.

Samsung Electronics did not promptly respond to journalists' requests for comment.

Reuters reports that in May, Samsung’s management and labor union agreed on new compensation terms. Under the terms of the deal, the company will allocate approximately 10.5% of the semiconductor division’s annual operating profit to special bonuses for employees in the form of stock. This decision has already sparked a wave of discontent within the tech giant due to growing income inequality between departments.

Restrictions will be imposed on the sale of bonus shares: employees will be able to sell only one-third of their treasury shares immediately. Another third will become available in one year, and the remainder in two years.

In addition, Samsung may need to conduct an additional share buyback to finance its PSU (Performance Stock Unit) program. This long-term incentive plan, launched last October, ties the compensation of the company’s top management and key specialists to its market performance, Reuters explains.

Despite Samsung’s stock rising by more than 180% since the start of the year, the South Korean tech giant’s shares have been significantly affected over the past few months by the company’s protracted disputes with the union: Demanding higher bonuses in line with the explosive results of the company’s semiconductor business—which has reaped windfall profits from the AI boom—Samsung employees threatened management with prolonged strikes that could paralyze chip production.

In addition, this week investors began to question the wisdom of big tech companies’ large-scale investments in AI. The sell-off on June 23, triggered by concerns over an overheated AI market and a possible interest rate hike by the U.S. Federal Reserve, caused the South Korean Kospi index to drop by nearly 10%. The wave of sell-offs spread to global markets as well: European and U.S. stock indices turned negative. At the close of trading on Tuesday, the Nasdaq Composite Index lost 2.2%, while the S&P 500 fell 1.4%.

This article was AI-translated and verified by a human editor