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The Peninsula

Long Shadow of the Samsung’s Fight with International Activist Investors

Published September 17, 2020

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here.

What Happened

  • In the ongoing investigation into whether Samsung manipulated stock prices to facilitate a merger between two subsidiaries, Korean prosecutors faced scrutiny for ignoring independent recommendations against an indictment.
  • Domestic pundits now add that continuing the investigation into Samsung may strengthen hedge fund Elliott Management’s legal case against the Korean government.
  • This comes amid growing anxiety that legal probe into the conglomerate could harm the broader economy already affected by the pandemic-induced recession.

Implications: Many domestic market influencers see aggressive foreign activist investors as a bigger threat than potential improprieties by domestic conglomerates. Citing international media reports, many Korean market commentators argued that the government’s ongoing probe into Samsung could strengthen Elliott’s lawsuit against Korea’s sovereign wealth fund in a related legal case. These activist investors were initially seen as potential forces that could help discipline perceived improprieties by large companies like Samsung. However, Elliott’s decision to sue the Korean government may have turned that initial enthusiasm into anxiety.

Context: Elliott Management was a minority shareholder of a Samsung subsidiary that were merged to secure Vice Chairman Lee Jae-yong’s controlling share of the conglomerate. The hedge fund claimed that their buyout was underpriced, reportedly incurring losses as high as USD 770 million. It blamed Korea’s National Pension Service, another minority shareholder, for casting the decisive vote sanctioning the merger. This became the basis for the lawsuit against the Korean government at the Investor-State Dispute (ISD) Tribunal. However, the ISD rejected an earlier attempt by Elliott to access government files to bolster their claim.

Korea View was edited by Yong Kwon with the help of Sophie Joo, Sonia Kim, and Chris Lee.

Picture from an article published in The Investor on July 10, 2017

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