Amid trial, Samsung shares soar

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Amid trial, Samsung shares soar


Protesters demonstrating in front of the special prosecutors’ office in Daechi-dong demand that Samsung Group Vice Chairman Lee Jae-yong be arrested for involvement in the Choi Soon-sil scandal. [YONHAP]

Shares of Samsung Electronics again closed at an all-time high of 1,940,000 won ($1,637) on Thursday, ascending 1.36 percent. It’s an unusual record, considering the company’s de facto chief and Vice Chairman Lee Jae-yong was being questioned by prosecutors as a suspect in a graft scandal surrounding the impeached President Park Geun-hye and her confidants.

Shares have been skyrocketing recently largely because many investors have separated the company’s performance and potential from the risk incurred from the volatile situation of the owner family, insiders say.

“What have been propelling Samsung’s share prices are 3D NAND memory chips and flexible organic light-emitting diodes, whose significance is still growing, and demand has been exploding,” said Kim Young-woo, a senior analyst at SK Securities. “Samsung is enjoying the synergy cycle for its shares created by the two products to the fullest.”

Samsung said in its earnings guidance last week that it expects to have posted an almost 50 percent jump in its operating profit from the October-to-December period - a 9.2 trillion won earnings surprise.

“Samsung shares are now moving in reflection of the earnings results projected to improve in the future,” said another analyst. “The so-called owner risk and the probe have already been exposed to the market on a sufficient level. Even if the shares fluctuate in coming days, they would eventually recover and continue climbing.”

Analysts seem to have reached a consensus that Samsung shares would surge above 2 million won imminently. Data compiled by securities information provider FnGuide show brokerage houses have set Samsung’s target price at 2.25 million won on average, with the highest at 2.5 million won.

Lee was still being questioned at press time and under the worst-case scenario prosecutors may arrest the third-generation Samsung leader. Samsung declined to comment.

Despite upbeat forecasts, Lee being placed behind bars has the potential to wreak havoc on Samsung’s international relations and its business. Samsung may be held accountable for the Foreign Corrupt Practices Act, which generally prohibits bribes to foreign officials to assist in obtaining or retaining business. The act can apply to conduct anywhere in the world and extends to publicly traded companies and their workers, meaning Samsung could be forced to pay an astronomical penalty in the United States or be banned, lawyers say.

Samsung operates in the United States, has been involved in joint ventures there, and is listed on the London Exchange. Should special prosecutors conclude that Samsung bribed the National Pension Service to approve the $8 billion merger of Samsung C&T and Cheil Industries, U.S. activist fund Elliott Management, which opposed the deal, may challenge Samsung with a legal act known as investor-state dispute settlement, or ISDS. The ISDS courts can award billions of dollars to the company for the loss of expected profit.

Meanwhile, SK Group, the country’s third-largest conglomerate, is on a fresh alert as new evidence alleges the 11.1 billion won it donated to the two nonprofits that Park’s confidante Choi Soon-sil practically controlled was in return for a pardon for SK Chairman Chey Tae-won. Prosecutors said Wednesday they had secured a taped conversation between Chey and SK’s vice CEO Kim Young-tae in prison on Aug. 10, 2015. Chey, convicted of embezzlement and corporate malpractice, was pardoned in August, a month after one of SK’s top executives had a one-on-one meeting with President Park.

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