“The move is necessary,” the company said in a statement, “to protect
the company and shareholders from overseas hedge funds that pursue
profit-taking, and to improve its liquidity and financial health.”
The use of treasury shares was a trick of South Korean trade. It is a type
of share that chaebol ruling families give to allies in exchange for
supporting controversial shareholder decisions. Once a company sells its
treasury shares, their voting power is activated. It is a way of creating
shareholding power out of what seems like nothing.
“That was dirty,” an Elliott employee told me. Samsung C&T’s stock
fell, effectively sabotaged by the company’s own managers.
The sale was “deeply alarming,” Elliott said in a statement, explaining
that it “intentionally diluted the voting rights and the value attributable to
Samsung C&T shareholders.” The next day, Elliott filed for another
injunction to stop KCC from voting.
On July 1 a South Korean court shot down the hedge fund’s petition and
declared that the merger vote must go on—since the sale didn’t constitute
an illegal transfer of wealth to a ruling family, and Samsung had followed
the law in calculating the merger ratio through a predetermined ratio based
on recent stock prices.
On July 3 Elliott appealed. It was fourteen days before the scheduled
vote.
The gears of the Republic of Samsung were spinning at top speed.
Samsung ran ads appealing to the emotions of shareholders and the nation
in more than a hundred newspapers, as well as on eight broadcasters, six
cable channels, and two Internet portals—all on a single day.
“Elliott is trying to defeat the merger. We implore our Samsung C&T
shareholders,” announced a TV spot.
Next, Samsung executives pulled up the company’s shareholder list and
sent out five thousand employees with walnut cakes, watermelons, and
other fruits to shareholders’ homes across Korea, serenading them on the
merits of the merger. “We beg of you, meet us in person,” a Samsung
employee pleaded over an apartment intercom to a retiree holding about
0.004 percent of Samsung C&T stock.
“That’s shady,” a representative of a minority shareholder said to me in
a coffee shop. “Very shady.”
In the meantime, Jang Choong-Ki, a powerful Samsung president from
the Tower, the Future Strategy Office, received updates on Elliott’s actions