Why Samsung Just Split Its Stock For The First Time Ever
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President and Head of CE of Samsung Electronics HS Kim speaks during a press event for CES 2018 at the Mandalay Bay Convention Center on January 8, 2018 in Las Vegas, Nevada. Photo by Alex Wong/Getty Images
Samsung Electronics is now the world’s largest chipmaker by revenue, ousting Intel from its 25-year reign as the industry’s foremost supplier of semiconductors. At $69 billion in revenue from its semiconductor business in 2017, Samsung easily bested Intel’s record annual sales of $63 billion.
That’s not the only market-moving news the South Korean electronics giant had to report this week. On Wednesday, Samsung Electronics announced it would split its stock 50-to-1. Such a move lowers the price of a stock while increasing the number of shares. (The number of Samsung Electronics stocks will jump from 128,386,494 to 6,419,324,700, according to Korea’s financial supervisory.)
At a Jan. 2018 high of $2,376, a share in Samsung Electronics is hardly accessible to the public. Some 3% of its shareholders are individuals, said Tom Kang, research director of mobile devices at analysis firm Counterpoint Research. By the time the new dividend is established in May, stocks will cost around $45.
"For the most part, the rise in Samsung shares only benefited big investors and left out most small-time stock investors," one markets observer said to Yonhap News on Wednesday.
A customer walks past Samsung Electronics Co. Ultra High Definition (UHD) televisions at an E-Mart Inc. Electro Mart store in Gimpo, South Korea, on Friday, Jan. 5, 2018. Photographer: SeongJoon Cho/Bloomberg
Increased accessibility is what Samsung said it pledged to do in Wednesday’s press release. The organization said more investors asked for cheaper shares as the company attracted more investors throughout its uber-successful 2017. “The Board believes the stock split announced today will make investing in Samsung Electronics more accessible and provide dividends to a wider range of investors from 2018,” the press release said.
Such is a common motivation for companies that have seen their stock prices rise too much. Microsoft has split its stock nine times, Apple four times, and Amazon three times, according to the Motley Fool.
Unusually, Samsung has never split its stock before, although it has lingered in the four-digits throughout the 2010s. When a share gets that high, the company usually decides to split the stock. So, why didn’t it split earlier?
Political motivations
Samsung casted its stock split as a move to boost the wealth of individual shareholders. Kang of Counterpoint said that’s indicative of South Korea’s current political climate. Pres. Moon Jae-in took office in May last year following the ouster of former Pres. Park Geun-hye, who was implicated in a massive influence-peddling scheme and has been detained since March.
More on Forbes:Five Things To Know About South Korea's Presidential Scandal
One of Moon’s winning campaign points was his interest to disentangle the ties between the central Korean government and the massive family-run conglomerates, called chaebol, that dominate Korea’s economy. As a result, corporations are increasingly asked to serve in the public’s interest, not just to line the ruling family’s and government’s pocketbooks.
Jay Y. Lee, co-vice chairman of Samsung Electronics Co., right, is escorted by a prison officer as he leaves the Seoul Central District Court in Seoul, South Korea, on Friday, Aug. 25, 2017. Photographer: Chung Sung-Jun/Pool via Bloomberg
Samsung is the biggest chaebol of the bunch, and one that’s been under particular scrutiny by the Korean public. Jay Y. Lee, Samsung’s de facto head, was sentenced in August to five years in prison for his involvement in former Pres. Park’s corruption scandal.
The company, which has around half of its shareholders in Korea, is looking to seem more for the individual rather than Samsung’s ultra-wealthy ruling family. “There’s a lot of political pressure on corporates with the new government in Korea,” Kang said in a phone interview.
The split is “with the tone of the Korean society at this moment,” Kang added.
“Under the Moon administration, it’s more of a people’s government and a more egalitarian atmosphere.”
A detail of a silicon wafer is shown on the production line of Hana Micron Inc.'s plant in Asan, South Korea, on Wednesday, Nov. 11, 2009. Its biggest customers are Samsung Electronics Co. and Hynix Semiconductor Inc. Photographer: Seokyong Lee/Bloomberg
A too-strong won
Experts have pointed to a higher Korean won as a motivation for Samsung to split up its stocks. Samsung said their profit sank by 660 billion won ($615.5 million) due to the strengthened Korean won, Bloomberg reported on Wednesday.
“Regardless of where Jay Y. Lee is, the top priority for Samsung is keep up profit in the face of uncertainties from the strengthening won to the growing specter of protectionism,” said Claire Kim, an analyst at Daishin Securities, in a Bloomberg interview. “Relief about the prospect of the market should spread among investors after the earnings announcement.”
After record profits in 2017, Samsung said on Wednesday that its 2018 outlooks remain strong. The electronics giant said it expects increased profitability from its screen business and mobile products along the price spectrum. As for its ultra-profitable chips business, Samsung said that is expected to remain stable.
More on Forbes:Samsung Is Having An Awesome Year, Despite Its Note 7 And Bribery Scandals
">President and Head of CE of Samsung Electronics HS Kim speaks during a press event for CES 2018 at the Mandalay Bay Convention Center on January 8, 2018 in Las Vegas, Nevada. Photo by Alex Wong/Getty Images
Samsung Electronics is now the world’s largest chipmaker by revenue, ousting Intel from its 25-year reign as the industry’s foremost supplier of semiconductors. At $69 billion in revenue from its semiconductor business in 2017, Samsung easily bested Intel’s record annual sales of $63 billion.
That’s not the only market-moving news the South Korean electronics giant had to report this week. On Wednesday, Samsung Electronics announced it would split its stock 50-to-1. Such a move lowers the price of a stock while increasing the number of shares. (The number of Samsung Electronics stocks will jump from 128,386,494 to 6,419,324,700, according to Korea’s financial supervisory.)
At a Jan. 2018 high of $2,376, a share in Samsung Electronics is hardly accessible to the public. Some 3% of its shareholders are individuals, said Tom Kang, research director of mobile devices at analysis firm Counterpoint Research. By the time the new dividend is established in May, stocks will cost around $45.
"For the most part, the rise in Samsung shares only benefited big investors and left out most small-time stock investors," one markets observer said to Yonhap News on Wednesday.
A customer walks past Samsung Electronics Co. Ultra High Definition (UHD) televisions at an E-Mart Inc. Electro Mart store in Gimpo, South Korea, on Friday, Jan. 5, 2018. Photographer: SeongJoon Cho/Bloomberg
Increased accessibility is what Samsung said it pledged to do in Wednesday’s press release. The organization said more investors asked for cheaper shares as the company attracted more investors throughout its uber-successful 2017. “The Board believes the stock split announced today will make investing in Samsung Electronics more accessible and provide dividends to a wider range of investors from 2018,” the press release said.
Such is a common motivation for companies that have seen their stock prices rise too much. Microsoft has split its stock nine times, Apple four times, and Amazon three times, according to the Motley Fool.
Unusually, Samsung has never split its stock before, although it has lingered in the four-digits throughout the 2010s. When a share gets that high, the company usually decides to split the stock. So, why didn’t it split earlier?
Political motivations
Samsung casted its stock split as a move to boost the wealth of individual shareholders. Kang of Counterpoint said that’s indicative of South Korea’s current political climate. Pres. Moon Jae-in took office in May last year following the ouster of former Pres. Park Geun-hye, who was implicated in a massive influence-peddling scheme and has been detained since March.
More on Forbes:Five Things To Know About South Korea's Presidential Scandal
One of Moon’s winning campaign points was his interest to disentangle the ties between the central Korean government and the massive family-run conglomerates, called chaebol, that dominate Korea’s economy. As a result, corporations are increasingly asked to serve in the public’s interest, not just to line the ruling family’s and government’s pocketbooks.
Jay Y. Lee, co-vice chairman of Samsung Electronics Co., right, is escorted by a prison officer as he leaves the Seoul Central District Court in Seoul, South Korea, on Friday, Aug. 25, 2017. Photographer: Chung Sung-Jun/Pool via Bloomberg
Samsung is the biggest chaebol of the bunch, and one that’s been under particular scrutiny by the Korean public. Jay Y. Lee, Samsung’s de facto head, was sentenced in August to five years in prison for his involvement in former Pres. Park’s corruption scandal.
The company, which has around half of its shareholders in Korea, is looking to seem more for the individual rather than Samsung’s ultra-wealthy ruling family. “There’s a lot of political pressure on corporates with the new government in Korea,” Kang said in a phone interview.
The split is “with the tone of the Korean society at this moment,” Kang added.
“Under the Moon administration, it’s more of a people’s government and a more egalitarian atmosphere.”
A detail of a silicon wafer is shown on the production line of Hana Micron Inc.'s plant in Asan, South Korea, on Wednesday, Nov. 11, 2009. Its biggest customers are Samsung Electronics Co. and Hynix Semiconductor Inc. Photographer: Seokyong Lee/Bloomberg
A too-strong won
Experts have pointed to a higher Korean won as a motivation for Samsung to split up its stocks. Samsung said their profit sank by 660 billion won ($615.5 million) due to the strengthened Korean won, Bloomberg reported on Wednesday.
“Regardless of where Jay Y. Lee is, the top priority for Samsung is keep up profit in the face of uncertainties from the strengthening won to the growing specter of protectionism,” said Claire Kim, an analyst at Daishin Securities, in a Bloomberg interview. “Relief about the prospect of the market should spread among investors after the earnings announcement.”
After record profits in 2017, Samsung said on Wednesday that its 2018 outlooks remain strong. The electronics giant said it expects increased profitability from its screen business and mobile products along the price spectrum. As for its ultra-profitable chips business, Samsung said that is expected to remain stable.
More on Forbes:Samsung Is Having An Awesome Year, Despite Its Note 7 And Bribery Scandals
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