Shares of Korean electronics manufacturer Samsung fell more than 12.2% Tuesday after the company announced that it will consider possible changes to its corporate structure, including possibly splitting the company, following a series of adviser reviews.
The latest news from Samsung comes as a response to heavy activist pressure from Elliot Associates, a firm that holds less than 1% of the company but recently launched a campaign to compel executives to tidy up its governance and provide better value to shareholders.
Samsung did not comment specifically on any restructuring plans beyond the adviser reviews, which will be completed in no more than six months.
“We want to be absolutely clear that that the review does not indicate the management or the board's intention one way or another,” said Robert Yi, head of investor relations at Samsung. “We remain absolutely neutral at this point and will make a decision only after the review is complete.”
Although Samsung did not present any restructuring plans yet, the company did comment on the concerns regarding shareholder returns. Samsung said it will allot 50% of its free cash flow in 2016 and 2017 to give back to shareholders; the company also said that it will increase total dividends by 30% this year.
Samsung also suggested that it will be appointing new members to its board of directors. These new board members will apparently have global experience, and the company will also be setting up a new governance committee made up of only independent directors.
Samsung’s new plans come in the wake of a disastrous scandal involving its Galaxy Note 7 phone, which was found to spontaneously combust. The “exploding” phones were recalled, opening the door for competitors like Apple (AAPL - Free Report) to scoop up loyal customers.
The Korean manufacturer is also sure to be feeling the overall distrust of its domestic economy right now. On Tuesday, South Korean President Park Guen-hye offered to resign before her term is up amid a corruption and influence-peddling scandal.
One final bit of news to note, especially for American investors, is that Elliot Associates has suggested that Samsung list on the Nasdaq as a means of increasing shareholder liquidity.
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