Samsung’s Stock Takes $17.6B Hit As Korea Scandal Continues

July 17, 2017 - Written By Dominik Bosnjak

Samsung Group’s market capitalization took a $17.64 billion hit on Friday as the domestic political scandal that led to the arrest of its Vice Chairman and heir apparent Jay Y. Lee continued, with the Blue House — South Korea’s executive office and the President’s official residence — releasing a number of controversial documents that were in the possession of the former administration led by the impeached President Park Geun-hye. The newly uncovered information gave more credence to allegations that the previous head of state was personally involved in a scheme to facilitate succession proceedings at Samsung Group and grant more power to the part of the chaebol controlled by the founding Lee family that formally holds only a minor stake in the largest business conglomerate in the Far Eastern country. Following the revelation, a significant number of Samsung’s investors — largely foreign ones — started dumping the firm’s stock en masse, apparently worried that the documents could potentially be used against Lee in the still ongoing trial which has him facing charges of bribery, embezzlement, and hiding the proceeds of a criminal act.

The share price of Samsung Electronics dropped by $3.53 on Friday, with foreign investors selling $34.41 million worth of shares on the same day, leading to a significant decline in the conglomerate’s market cap. The listing prices of most other subsidiaries of Samsung Group weren’t affected until today as they already closed down by the time the aforementioned documents were released by the top executive office in South Korea. The contents of the revealed documentation are yet to be clarified, though initial reports indicate that former President Park was looking to personally benefit from management succession practices at Samsung. Park herself already refused to testify at Lee’s trial but was also officially charged by the state prosecution earlier this year.

Samsung’s market performance has been relatively stable throughout the political scandal that the company has been enduring in recent months and will likely also survive the latest turn of events. However, if Lee is ultimately given a lengthy prison sentence that some actors in the country are calling for, the Seoul-based tech giant may be facing much larger issues in the medium term as no apparent replacement for Lee has yet been seriously discussed within the company, according to recent reports.