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The Great Divide: Samsung Shareholders Calling For A Split

By Edge Ison , Nov 29, 2016 12:38 AM EST
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Samsung Electronics Co. Ltd. is headed for a split should some of its shareholders' wishes or demands be met.

Elliott Management, an activist hedge fund from the United Sates that owns 0.6 percent of Samsung, is pressuring the company to divide itself into two - a holding vehicle to help the owners and an operating company.

The U.S. fund's call was made back in October after the company was deluged with problem after problem during the year, especially during the third quarter. Some analysts believe that a split could help the heirs of the founding Samsung Group members to gain more control of the company.

In fact, 2016 is not one of the best years for Samsung. And that may be an understatement.

The much-publicized debacle that is the Samsung Galaxy Note 7 took a huge toll on the company. Samsung's losses due to the exploding Galaxy Note 7 is estimated to reach around $3.1 billion.

A month or so later, the Korean tech giant also announced a recall involving its top-load washing machines. An estimated 2.8 million washers had to be taken back for repairs after more than 700 reports stated that the machines excessively vibrated t the point that the lids flew off. The issue injured at least nine people.

To make matters worse, Samsung's headquarters in Seoul was involved in a political scandal. South Korean prosecutors raided the headquarters in relation to a corruption charge involving the company and Choi Soon-Sil, who is close to President Park Geun-hye.

The two previous incidents paved the way for Samsung to publish full-page ads on newspapers to signify its regrets and offered an apology to everyone who was affected. Of course, the company is not stopping with the apology.

Samsung is in the process of analyzing different measures to keep the company from falling even more. One measure being a look at  the return of 75 percent of free cash flow to investors. Another potential move is to appoint independent directors in the board.

As of now, the rumored split remains just that - a rumor. While there are indeed calls for the move from some of its shareholders, Samsung is focusing more on other steps to insure the company will remain an important player n the tech industry.

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