Contrary to Market Expectations
Contrary to market expectations, the trading volume of Samsung Electronics shares has decreased following its 50:1 stock split. The company's stock price has not surpassed even once the basis price of 53,000 won (US$45.51).
Samsung Electronics’ daily average trading value has come to 525.60 billion won (US$451.35 million) since May 4 last year when it resumed trading after its stock split, down nearly 100 billion won (US$85.92 million) from 618.80 billion won (US$531.66 million) over the past year before the stock split, according to Korea Exchange (KRX) on May 2.
The daily average trading volume greatly increased from 250,000 shares to 11.61 million shares over the same period. However, the actual change in trading volume also fell from 12.50 million shares considering that a stock split increases the number of shares in a company at the same price. The company’s daily trading value in May last year right after its stock split reached an all-time high, surpassing the 3 trillion won (US$2.57 billion) level, but it was a transitory event.
The root cause of sluggish trading is the stagnant stock price. The price of Samsung Electronics shares has dropped by more than 11 percent during the one year period. Investors call Samsung Electronics as “40,000 Electronics” as its stock price has mostly remained at the 40,000 won (US$34.29) level. The price fell short of 40,000 won (US$34.29) for a while at the end of last year and earlier this year. This was due to the fact that the global memory chip market conditions got worse and the company showed a weak performance. The number of individual investors who bought up Samsung Electronics shares with expectations for an increase in the value rose from 158,000 at the end of 2017 to 788,000 in 2018 but they saw a loss rather than a gain.
In addition, an excessive increase in the number of Samsung Electronics shares due to the stock split also reduced its liquidity and lowered its prices. The total number of the firm’s listed shares stood at 5,969,782,550 as of May 2, which is the highest among KOSPI-listed firms. The figure is seven times as high as 868,530,000 of Hanwha Life Insurance Co. which ranks second.