Samsung Electronics Co said on Tuesday it is considering the idea of a stock split, answering a call from regulators for lower share price in order to revitalize trading.
The possible stock split was first mentioned by Robert Yi, Samsung’s head of investor relations during an event in Seoul. However, Mr. Yi said that no decision was made as the South Korean company is still evaluating the idea.
Samsung has been facing a lot of pressure from the Korea Stock Exchange to reduce to value of its shares. The domestic operator has been pushing companies with high priced shares to initiate a stock split in order to revive trading.
“We acknowledge the sentimental effect of a stock split, but how big an effect such an action can have on the companys long-term value needs to be considered from a variety of angles,” Mr. Yi said without disclosing any details.
Following Mr. Yi speech, Choi Kyung-soo, chairman of the Korea Exchange again insisted that stock splits are necessary for companies with high priced shares, outlining that only 0.09% of Samsungs stock was traded every day on average. However, Mr. Kyung-soo said that companies are reluctant to take such actions as they take pride in higher priced shares.
A possible split would likely encourage smaller investors to buy a piece of the company and thus boost the companys market capitalization.
The possible move comes amid weaker smartphone sales from Samsung as it faces severe competition from both high-end rivals, like Apple, and low-cost Chinese companies, like Xiaomi.
Investors confidence in the worlds largest smartphone maker has been falling during the past year. However, in December the company initiated a $2 billion share buy-back program and said it would lift its 2014 dividend payment by 30% to 50%, answering a call from investors for higher shareholder returns.
Since the announcement, Samsungs shares rebounded, but they remain well below last years high at $1 380.
Currently Samsung represents moves around 16% of South Koreas Kospi composite index, which is five times more than the second-largest company in the country.
A possible stock split would follow Apples decision in June, when the worlds largest company by market capitalization announced it would divide its shares in seven. Apples stock has increased 37.7% during the past year, partly due to the split.
Samsung Electronics edged up 2.16% and closed at ₩1 372 000 in Seoul, marking a one-year increase of 4.26%. The company is valued at ₩217.14 trillion.
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