Samsung Electronics, 'surprise' decision to split the face ... Why?

Samsung Electronics, 'surprise' decision to split the face ... Why?

Samsung's share price has skyrocketed with the announcement of a 'surprise' split decision. 

It is the first time Samsung Electronics has split the face value since it was listed.

On January 31, Samsung Electronics announced that it would split its face value per share from W5,000 to W100 to expand the number of shares outstanding.

If the face value is divided by 50 to 1, the share price is reduced to one-fifty, but the stock number is increased 50 times.

The market value remains the same, but it has the effect of dividing the stock so that more stocks can be traded in the market. In the case of existing shareholders, there is no change in the value of equity holdings or equity holdings.

Based on Samsung Electronics' current share price of W2.6mn, the share price will fall to W52,000 after the par value split. Instead, the number of issued shares will increase to 6,119,324,700 from a total of 118,866,449.

The reason why listed companies split the face is to increase liquidity.

It is not easy for individual investors to buy high-priced Samsung Electronics shares worth more than 2.5 million won a week, but if the stock price drops to 50,000 won after the par value split, it is expected that the accessibility will be easier and the volume of transactions will increase.

At the KOSPI market, the par value split was rarely done at a high price of around W1 million per week called 'Hwangjeju'.

In 2015, AMOREPACIFIC adjusted its share price of KRW300,000 to KRW300,000 for a 10-to-1 par value split. Last year Orion lowered its share price from KRW800,000 to KRW80,000 with a 10-to-1 split.

On the stock price side, the total market capitalization has increased after liquidation.

"If the KTOP30 index, which uses the price-weighting method, is included, high-priced shares will be disadvantageous, and if the price is lowered, it will have a positive effect on supply and demand," said Choi Chang-gyu, an analyst at NH Investment Securities.

Samsung Electronics' share price has soared by more than 5% since the announcement of the liquidation. 

As of 10 am on the same day, Samsung Electronics is up 5.66 percent (KRW 140,000) from the previous day to 2.63 million won.