Korean Preferred Shares Explained: Why They Trade at a Discount

Many large Korean companies list two kinds of shares: common stock and preferred stock, called useonju in Korean. The preferred shares usually carry no vote but receive the same dividend as the common shares, or a little more. They still trade at a steep discount.

On Nov. 6, 2026, Samsung Electronics' preferred shares closed at ₩150,300 ($111), 20.3% below its common shares at ₩188,700 ($139), by our calculation from Korea Exchange (KRX) closing prices. The gap was 47.2% for Hyundai Motor's first preferred line and 54.9% for LG Chem's. Dollar figures here use ₩1,356.6 per dollar, the Seoul 3:30 p.m. rate on Nov. 6, 2026, reported by the Korea Herald.

The discount has become a target for activist funds and for Korea's push to lift share prices. Of 114 listed preferred stocks, 79 traded below their common shares at the close on Sept. 15, 2026, at an average discount of 41.37%, according to a KRX analysis reported by the Asia Business Daily.

For a foreign investor, the two classes offer the same company at two prices, with different rights attached. Here's what you need to know.

What Are Korean Preferred Shares?

A Korean preferred share is a class of stock that gives up voting rights and, in return, ranks ahead of common shares for dividends. It is not the fixed-coupon, bond-like preferred stock common in the United States.

"Unlike conventional preferred shares in many overseas markets, Korean preferred shares generally carry similar economic entitlements to common shares but typically lack voting rights," the Korea Herald reported on Oct. 14, 2026. In other words, the owner shares in profits almost exactly like a common shareholder but has no say at the annual meeting.

The rules come from the Commercial Act. Article 344-3 requires a company that issues non-voting shares to state in its articles of incorporation, the company's charter, which matters the shares cannot vote on and any conditions under which voting rights return. Such shares may not exceed one-quarter of all issued shares.

Samsung Electronics sits well inside that limit. On June 30, 2026, it had 5,846,278,608 common shares and 802,371,203 non-voting preferred shares, according to its half-year report on DART, the regulator's disclosure system. Preferred shares made up 12.1% of the total, by our calculation.

How Much Extra Dividend Do Preferred Shares Pay?

Often very little. Samsung Electronics pays its preferred shareholders ₩1 more per share per year than its common shareholders, its DART filings show.

The figure comes from Samsung's articles of incorporation, attached to its 2025 annual report. A supplementary provision says non-cumulative, non-voting preferred shares issued before Feb. 28, 1997, receive an extra cash dividend of 1% of par value a year over the common dividend. Samsung's par value is ₩100 a share, so 1% is ₩1.

The annual totals show it. For 2025, Samsung paid ₩1,668 per common share and ₩1,669 per preferred share; for 2024, ₩1,446 and ₩1,447, according to the dividend table in its half-year report. The quarterly payouts are identical: ₩372 and ₩374 per share for both classes in the first two quarters of 2026.

The third-quarter payout, approved on Oct. 29, 2026, was ₩4,601 ($3.39) for both classes, payable on Nov. 27, 2026. Because the preferred shares cost less, the filing put their dividend yield at 2.2%, against 1.7% for the common shares.

Simply put, a Samsung preferred share receives almost exactly the same cash as a common share, but it costs about a fifth less. The same charter clause also lets the company skip the preferred dividend in a year when it pays nothing on the common stock.

Other issuers set a larger premium. Hyundai Motor paid a 2012 dividend of ₩1,950 ($1.44) per preferred share against ₩1,900 for its common shares, Bloomberg reported in an article carried by the Korea JoongAng Daily on Nov. 25, 2013.

How Are Preferred Shares Named and Coded?

A preferred line usually shares the first five digits of its common stock's six-digit code and ends in a different final digit. In KRX trading data, Samsung Electronics' common stock is 005930 and its preferred is 005935, while LG Chem's are 051910 and 051915.

Hyundai Motor shows how later classes are numbered. Its common stock is 005380, its first preferred line is 005385, and two later lines are 005387 and 005389. Treat the final digit as a pattern, not a rule, and check the name before placing an order.

In Korean, the listing name adds a syllable meaning "preferred" to the company's short name. Later classes add a number and the letter B, which English coverage renders as names such as "Hyundai Motor 2 Preferred B."

A B line was issued as a separate class, so its terms can differ from the first preferred line. Samsung's charter shows what newer preferred shares can look like. Under Article 8, any preferred shares it issues are cumulative, meaning missed dividends carry forward, and get a minimum dividend of at least 9% of par value a year, set at issue. They convert into common stock after 10 years.

The exact terms of any class are in the issuer's articles of incorporation, which Korean companies attach to their annual reports on DART. Our guide on how to read Korean company filings explains where to find them.

Why Do Korean Preferred Shares Trade at a Discount?

Three reasons recur: the missing vote, thinner trading and governance. "Differences in voting rights, liquidity and investor demand can contribute to their lower valuations," the Korea Herald reported.

Voting rights. Common shareholders elect directors and approve mergers. That vote carries more weight in Korea, where families often control large groups with small stakes, as our explainer on the Korea discount describes. A preferred holder has no part in those decisions.

Liquidity. Preferred shares trade far less. On Nov. 6, 2026, Samsung's common shares traded ₩6.71 trillion ($4.94 billion) in value, against ₩851.4 billion ($628 million) for its preferred shares, according to KRX data. LG Chem's preferred traded ₩2.3 billion ($1.7 million), compared with ₩56.5 billion ($41.6 million) for its common stock.

Governance and buybacks. Companies have mostly bought back and cancelled common shares, which supports the common price. Samsung may now lean the other way. Samsung Life and Samsung Fire & Marine Insurance hold Samsung Electronics stakes near a 10% legal ceiling, so cancelling more common shares would push their ownership higher, Kim Suhyun, head of research at DS Investment & Securities, said in a Sept. 17, 2026, report by the Asia Business Daily.

That makes it "difficult to significantly increase the volume of common share cancellations," Kim said, according to the newspaper's English edition. He noted that 30% of Samsung's buybacks in a 2015 program went to preferred shares and that the discount later narrowed to the 10% range.

Activists are pressing for the same thing. "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," James Smith, founder and chief investment officer of London-based fund Palliser Capital, said, according to the Korea Herald on Oct. 14, 2026.

Samsung said it was "considering ways to address the discount of preferred shares relative to ordinary shares and enhance their value," the Herald reported. For the government program behind those plans, see our guide to the Corporate Value-up Program.

How Big Is the Preferred Share Discount?

It ranges from about a fifth at Samsung to more than half at LG Chem. The table uses closing prices on Nov. 6, 2026, from KRX trading data; the discount is the preferred price's shortfall from the common price, by our calculation.

The 2013 column comes from the Bloomberg article carried by the Korea JoongAng Daily on Nov. 25, 2013, which did not say which Hyundai line it measured. Methods and dates differ, so the comparison is rough.

Samsung's gap has moved within weeks. It was 24.71% at the Sept. 15, 2026, close, above its three-year average of 18%, the Asia Business Daily reported. Prices cited by the Korea Herald on Oct. 14 put it at 25.6%, by our calculation, close to the 26% Palliser cited, and Palliser put the average across Hyundai's three lines at about 48%.

Interest in the discount is not new. "In the past, nobody looked at preferred stocks in Korea," Moo Il-jung, a money manager at Franklin Templeton, told Bloomberg on Nov. 21, 2013.

What Are the Risks of Small Korean Preferred Shares?

The biggest risk is in the smallest lines. A preferred class with few shares in circulation can trade thinly, and its price can jump far above the common stock for no business reason.

In June 2020, Samsung Heavy Industries' preferred shares rose by the daily limit for 10 straight sessions. The KRX responded with a package announced on July 9, 2020, the Asia Business Daily reported:

• Single-price trading: Preferred shares with fewer than 500,000 listed shares trade in single-price auctions every 30 minutes instead of continuously.
• Overheating: A preferred share whose price exceeds its common stock's by more than 50% is designated short-term overheated and trades by single-price auction for three days.
• Listing bar: New preferred listings need at least 1 million shares and ₩5 billion ($3.7 million) in market value, up from 500,000 shares and ₩2 billion.
• Delisting bar: The threshold for removal rose from 50,000 shares and ₩500 million to 200,000 shares and ₩2 billion ($1.5 million), effective in October 2021.
• Order warnings: Brokers show a warning and ask buyers to confirm before ordering a stock flagged for an abnormal surge.

Delisting follows when a line stays below the bar. The KRX decided on June 30, 2023, to delist five preferred stocks, including those of Samsung Heavy Industries, SK Networks and DB HiTek, effective July 17, 2023, KED Global reported. By then, Samsung Heavy's preferred traded at one twenty-fifth of its June 2020 peak.

Thin trading also limits large holders. Hyundai Motor's third preferred line traded ₩2.3 billion ($1.7 million) on Nov. 6, 2026, against ₩181.0 billion ($133 million) for its common stock. Price limits and trading halts also apply to preferred shares; see our guide to price limits, settlement and short selling.

The next marker is Samsung's. Its board plans to settle its next shareholder-return program in late January 2027. Daishin Securities analyst Ryu Hyung-geun expects buybacks and cancellations to center on preferred shares, at about ₩25 trillion ($18.4 billion), Hankyung reported on Oct. 30, 2026.

Together, Korean preferred shares offer nearly the same dividend as common shares at a lower price, and the gap reflects what they lack: a vote, trading depth and, until recently, a place in buyback plans.