Palliser Capital (“Palliser”), a global multi-strategy fund, today presented its analysis of Korea’s preferred share market at the annual Sohn San Francisco Investment Conference. Palliser Founder and CIO James Smith explained that while Korea’s governance reforms, improving corporate fundamentals and potential for stronger shareholder returns provide a pathway to narrowing the broader “Korea Discount,” preferred shares remain an overlooked structural issue. Unlike conventional preferred stock in many other markets, Korean preferred shares generally have substantially the same economic rights as ordinary shares but no voting rights. Despite this, they trade at a substantial discount to their respective ordinary shares, far below international comparables, representing more than $60 billion of trapped value.

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Samsung Electronics (“Samsung”) and Hyundai Motor Company (“Hyundai”) illustrate the significant opportunity for Korean companies to narrow preferred share discounts while unlocking value for all shareholders by reducing shares outstanding and increasing EPS.

Samsung’s preferred shares currently trade at a 26% discount to its ordinary shares, while Hyundai’s three preferred share classes currently trade at a discount of approximately 48% to their ordinary share counterparts. With both companies’ ordinary shares themselves undervalued, the preferred shares offer a compelling “discount-on-a-discount” opportunity against the backdrop of strong business fundamentals and, in Samsung’s case, its recently announced KRW 90-110 trillion (USD 67-82 billion) shareholder return commitment. With Samsung’s shareholder return ratio remaining below that of global peers, the company also has clear capacity to increase distributions further in its next shareholder return plan.

While Hyundai has helpfully acknowledged the preferred share discount and initiated steps to address it, Palliser believes more action is needed from both companies. As such, Palliser has proposed the following measures for Samsung and Hyundai to narrow their preferred share discounts, enhance capital efficiency and unlock significant value for all shareholders:

  • Prioritise preferred share repurchases and cancellations within shareholder return policies, including reallocating Samsung’s remaining FY’26 shareholder return budget towards preferred shares and prioritising preferred shares in Hyundai’s future buybacks while discounts remain elevated;

  • Incorporate explicit preferred share discount targets into their respective Value-Up plans, with Samsung specifically including a target in its upcoming FY’27-’29 shareholder return plan, similar to the 10% preferred share discount target it announced in FY’15;

  • Explore additional value-enhancing capital allocation measures, including, in Samsung’s case, the potential issuance of ADRs at a premium to fund further preferred share repurchases and cancellations; and

  • Strengthen governance protections for preferred shareholders to better safeguard their interests and reinforce the companies’ commitment to equitable shareholder treatment.

As industry leaders and two of Korea’s largest issuers of preferred shares, Palliser believes both companies have a responsibility to address these valuation gaps in the interests of all stakeholders, and to uphold the credibility of their commitments under their Value-Up plans. As a shareholder in both the ordinary and preferred shares of Samsung and Hyundai, Palliser is encouraged by the constructive dialogue it has had with both companies to date on proposals to realise this value-enhancing opportunity.

Smith said, “Korea has made significant strides in modernising its capital markets and strengthening corporate governance, while improving fundamentals and shareholder returns are creating a powerful backdrop for further value creation. However, the preferred share discount remains an overlooked governance and capital allocation anomaly. The natural next step to reduce the discount is for boards to address preferred shares explicitly in their Value-Up plans through buybacks, explicit discount targets, and other accretive measures. Addressing this issue would strengthen capital efficiency, unlock value for all share classes and reinforce the credibility of Korea’s ongoing market reforms.”

[Full details of the presentation are outlined in the accompanying attachment.]

About Palliser Capital

Palliser is an alternative investment manager that applies a value-oriented, event-driven philosophy to investing across a range of distinct yet complementary strategies on a global basis with a focus on situations where positive change and value enhancement can be achieved through thoughtful, constructive, and long-term engagement with companies and across a range of different stakeholder groups.

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