Puzzling stock transactions
Samsung Life Insurance Co. bought 32,000 shares of Samsung Securities Co. through its special account on April 6 when Samsung Securities mistakenly paid its employees stock dividends. The amount was not that big but it was unexpected for Samsung Life to purchase Samsung Securities’ stocks using its special account at the time when most institutional investors were selling Samsung Securities’ shares.
According to investment banking industry sources and market tracker WISEfn on April 19, Samsung Life’s special account held 139,198 shares of Samsung Securities on April 5, a day before the incident, and increased to 171,429 shares on April 6. It bought 32,000 shares in just one day and raised its stake from 0.16 percent to 0.19 percent.
Samsung Life’s special account, which separately manages variable insurance funds, manages accounts of policyholders who insured variable insurances and variable annuities. The dilution of equities of its special account leads to poor earnings rates of policyholders.
Samsung Life’s special account recently had a stake of between 0.13 percent and 0.16 percent. The company spent only 1.2 billion won (US$1.13 million) to additionally purchase 32,000 shares but officials from the securities and insurance industries said it was an unexpected move.
In addition, Samsung Life lowered its stake from 0.19 percent to 0.12 percent on the 11th after five trading days. The company sold 60,000 shares and kept only 100,000 shares. In particular, the company bought Samsung Securities’ shares at 37,800 won (US$36) but sold them at lower prices on a number of occasions. In short, Samsung Life sold the stocks at a loss.
Samsung Life’s special account is currently run by an authorized operator. Opinions differ in the market as to why Samsung Life bought Samsung Securities’ shares.
An official from the industry said, “Samsung Securities’ erroneous dividend payout incident was so cataclysmic that it could lead to a business suspension. So, the stock purchase is not in accordance with common sense.”
This is why some say that Samsung Life, the largest shareholder and the de facto financial holding company, bought stocks of Samsung Securities, through its special account in order to reduce the fall in its affiliate's stock prices.
An official from the industry said, “There is a chance of Samsung Life buying Samsung Securities’ shares at the dictation of the group. There is also a chance of the company mobilizing funds other than that from its special account. If Samsung Life’s fund manager followed the orders of the group to purchase Samsung Securities’ stocks in a bid to prevent the drop in stock prices, it broke the good faith principle as a fund administrator.”
However, an official from another industry said, “A considerable amount of money must have been injected if Samsung Life wanted to mitigate the depreciation of Samsung Securities’ stock prices. Considering the modest sum of transactions, it can be a simple stock trading.”