A South Korean hedge fund is urging Samsung Electronics Co. to buy back and cancel preferred shares, becoming one of the first shareholders to directly press for the step in hopes of boosting valuation. In a letter to Samsung's board and management this week, Life Asset Management called on the Korean tech giant to repurchase and cancel the shares until their price gap with common stock is erased, according to the fund's statement. Life Asset, which didn't disclose its Samsung stake, asked the board to review the plan during an October meeting and cancel the shares by December. Life Asset's call hints at more shareholder pressure coming Samsung's way after the chipmaker recently laid out plans to return as much as 110 trillion won ($81.7 billion) to investors this year to share an AI windfall. While Samsung hasn't fully disclosed details, company watchers have emphasized buying back preferred shares, given their steep discount to common stock.

Samsung's preferred shares rose as much as 3.3% on Tuesday, the most in nearly a week, while the common stock gained 1%. The Seoul-based hedge fund said as much as 73 trillion won of the shareholder return package, after special and regular dividends, should be allocated for the equity buyback. Its preferred shares now trade at more than a 25% discount to common stock. Market watchers expect Samsung to allocate a significant portion of the buyback to preferred shares given the move will be more cost efficient. Samsung is now in position to cancel 1.36 preferred shares for the same capital needed to cancel one common share, according to Life Asset.

The fund oversees $4 billion in assets, according to its website. Steering the buyback away from common shares would also help Samsung sidestep a rule that could force its affiliates to sell down its holdings. A Korean law bans financial affiliates from holding more than 10% of voting common stock.