Tech giants Samsung Electronics and Yahoo! have both made attention-grabbing moves to appease their investor bases this week, with Samsung saying it’s considering a stock split that would make its shares easier to buy and Yahoo! announcing it will spin off its 15 percent stake in Alibaba, which is worth about as much as the company itself.
Samsung Electronics, which has a share price well above $1,000, says it is determining how much impact a stock split would have as it strives to appease investors, many of whom are dissatisfied with the company’s earnings.
‘We acknowledge the sentimental effect of a stock split, but how big an effect such an action can have on the company’s long-term value needs to be considered from a variety of angles,’ Robert Yi, Samsung’s head of investor relations, told reporters at an event in Seoul. ‘We have not yet reached a stage where there will be a decision.’
Samsung has already launched a $2 bn share buyback program and announced an increase of about 50 percent on its 2014 year-end dividend compared with the previous year. A split could also increase the volatility of Samsung shares: Apple split its stock seven for one last year and ended 2014 with a yearly share price gain of almost 40 percent.
Meanwhile, Yahoo!’s decisive move to appease investors will create a company worth almost as much as Yahoo! itself. The company to be spun off will consist of just the stake in Alibaba that Yahoo! bought in 2005, when it paid $1 bn for 40 percent of the firm. Its remaining 15 percent stake in Alibaba is valued at $40 bn, accounting for most of Yahoo!’s $45 bn market valuation.
A spinoff of the Alibaba stake will give investors the full value of the Alibaba shares and allow Yahoo! to avoid paying the 35 percent tax it would face if it were to sell the stake. It will also increase the visibility of Yahoo!’s core business and put pressure on management to boost performance.
