Samsung Electronics announced a 50:1 stock split on Jan. 31, prompting urgent newsflashes in many South Korean media. But what does it mean to split a stock, and how will it affect investors, the company, and you?
Shares in South Korea’s biggest company are coveted and highly valued– reflected by their usual trading price of around 2.5 million won ($2,325) per share. This high price was a deterrent to small time investors interested in buying the company’s shares. Samsung Electronics thought so too, according to its press release: “The company had received numerous requests for a stock split based on the view that a high share price was a hindrance to potential investors.”
A 50:1 stock split means that a share worth 5,000 won ($4.67), for example, is split into fifty 100-won ($0.09) shares, both increasing the number of shares and lowering their price. Put simply, it’s like splitting cookies into smaller pieces for more people to share — in this case, increasing the number of issued Samsung Electronics shares from 128.4 million to 6.4 billion,according to the official filing on Wednesday.
This is the first time the South Korean tech giant has split its stocks. By contrast, Apple, has split its stocks four times since going public in 1980.
This move is favorable to Samsung Electronics’ share price as more individual investors are likely to jump at the opportunity to buy its coveted stocks. The company’s shares surged more than 8 percent at one point today after the announcements both of the split and of record 4Q earnings in 2017 of 12 trillion won ($11.2 billion).
Samsung claimed in its press release that the stock split would make it more accessible and “provide dividends to a wider range of investors.”
“The split is also expected to add both liquidity and marketability to the company’s stock, which may contribute to enhancing corporate value in the long term,” the Suwon-based company added.
Among us regular folks, excitement at the arrival of cheaper Samsung shares has not quite reached Twitter, where the conversation so far is confined to economic media and a handful of experts. Maybe cryptocurrency and the kimchi premium are still the hottest stories in the South Korean economy.
Cover image: A Samsung Electronics semiconductor factory in Gyeonggi Province (Source: Samsung Newsroom)