Samsung Stock Split Sends KOSPI on Rollercoaster Ride
01 February, 2018
Samsung Electronics, the top listed company on the Korea Composite Stock Price Index, has announced a stock split at a ratio of 50:1.
That will cause each W2.5 million share to be split into 50 shares worth W50,000 each, and 140 million outstanding shares will multiply to 7 billion (US$1=W1,068). The aim is to make Samsung shares more accessible to a wider number of investors and boost the company's market cap.
Samsung made the decision in a board meeting Wednesday. The final green light will have to wait until a general shareholders' meeting on March 23, and company will be re-listed around mid-May.
Chief financial officer Roh Hee-chan said, "There were persistent complaints that the high price of Samsung stocks prevented many from investing. We hope that the stock split will contribute to stimulating trading."
Foreign investors account for 53 percent of Samsung shareholders and institutional investors for 17 percent. Only three percent are individual domestic investors.
Analyst Lee Seung-woo said, "The measure is positive since it lowered the access barrier, but if Samsung fails to deliver solid earnings, it could end up being a bad decision."
The announcement sent Samsung shares soaring more than eight percent to over W2.7 million at one point in intra-day trading, but they closed up only 0.2 percent at W2.49 million.
The whole KOSPI was taken on a rollercoaster ride. Samsung shares surged more than five percent in morning trade, causing the KOSPI to rise more than one percent. But when they ceded most of the day's gains in the afternoon, the KOSPI closed down 0.05 percent.
Samsung Electronics accounts for one-fifth of the KOSPI's total market cap and wields tremendous influence on the main bourse. More than three months remain until it is relisted, but the stock market reacted at lightning speed.
But analysts urge investors to study Samsung's earnings outlook and overall industry conditions this year before going on a buying spree after the stock split.
Lee Chae-won at Korea Investment Value Asset Management said, "We need to be aware that domestic individual investors bought Samsung shares following the announcement but foreigners dumped the stock."
Foreign investors sold W615.4 billion worth of Samsung shares on Wednesday to cash in on the surge even as domestic individual investors snapped up W703.6 billion worth.
Park Kang-ho of Daeshin Securities said, "Investments must be made cautiously. But Samsung is undervalued compared to rivals Apple or Micron, so there is ample investment merit."