Samsung Electronics on Wednesday decided on its first-ever stock split by lowering the face value of its stocks from 5,000 won ($4.70) to 100 won, a move that would increase the number of common stocks and liquidity, with the aim of improving long-term corporate value.
The surprise decision, made in sync with the firm’s announcement of record highs in sales and operating profits in the fourth quarter of 2017, was immediately met with a jump in the company’s stock price.
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Samsung Electronics’ headquarters in southern Seoul on Wednesday (Yonhap) |
The 50:1 stock split increases the number of common issued shares from 128.4 million to 6.42 billion shares, with each share worth one-fiftieth of its original value.
The decision will be up for a vote by shareholders at the upcoming shareholders meeting scheduled for March 23.
A stock split lowers the price per share of a given stock and increases the number of shares, bringing down the entry barrier for new investors.
“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. The request increased in frequency as the price of our shares rose significantly during 2017,” Samsung said in a release.
In a conference call Wednesday on the company’s fourth-quarter earnings for 2017, the company said that trading on the newly split stocks was expected to begin in May, pending approval at the shareholders meeting.
“The stock split decision can be seen as evidence that Samsung Electronics’ management strategy remains focused on profitability,” wrote analyst Doh Hyun-woo for NH Research Center.
Bringing in new investors to buy Samsung stock is likely to increase the stocks’ market capitalization while increasing liquidity for the company.
News of the stock split caused a surge in the company’s share price. After rising more than 5 percent to break the 2.7 million won mark in the morning directly after the announcement, Samsung Electronics closed at 2.49 million won, up 0.2 percent from the previous day’s close.
Samsung Electronics also said Wednesday that it had completed the share repurchase program announced in the fourth-quarter earnings call for 2016.
The 9.2 trillion-won ($8.6 billion) program repurchased and canceled 3.3 million common shares and 826,000 preferred shares.
The board of directors also approved a year-end dividend of 21,500 won per common share and 21,550 won per preferred share, bringing to a close a three-year shareholder return program.
A new three-year return policy was announced for 2018-2020 in October 2017, including yearly dividends of 9.6 trillion won.
For the fourth quarter of 2017, Samsung Electronics announced a net profit of 12.26 trillion won, with sales of 65.98 trillion won, driven by sales of memory products DRAM and NAND.
By Won Ho-jung (
hjwon@heraldcorp.com)
