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THE INVESTOR
November 14, 2018
Big Reunion

Finance

Samsung Securities, did it go too short?

  • PUBLISHED :April 08, 2018 - 11:56
  • UPDATED :April 08, 2018 - 20:17
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[THE INVESTOR] Despite Samsung Securities’ frantic attempts to address one of its biggest technical “glitches” to date, the question that’s forming now is whether it was actually a mistake.

And the suspicions are not without ground, since the brokerage simply did not have any treasury stocks to begin with.

On April 6, Samsung Securities wired 1,000 company shares to its employees, instead of sending dividends of 1,000 won (US$0.93) per share as planned. In total, it sent 2.8 billion shares worth 112.6 trillion won (US$105.08 billion). 






RELATED: 
Samsung Securities shares tumble on dividend payout mistake


The brokerage explained that these were treasury stocks, but Samsung Securities doesn’t have any, not to mention that it only has 89.3 million shares outstanding in the markets, and that its stock issuance limit is set at 120 million.

Therefore, 2.8 billion is an amount that cannot exist, which is why critics are raising the possibility of naked short sales -- something that’s banned in Korea.

A public petition has now been filed with Cheong Wa Dae, asking the government to step in. The presidential office must respond to all petitions that collects up to 200,000 signatures within 30 days.

The Financial Supervisory Service, so far, seems to have ruled out short-selling as a motive, since the Samsung shares were actually visible in the employee accounts.

Another reason the public is so sore is due to the lack of internal control and ethics at one of the country’s five largest brokerages.

“It was a sore disappointment, seeing how unprepared the company and was, and how the employees scrambled to make money off of what was so obviously not theirs,” said one government official close to the issue told The Investor, declining to be identified.

 

An employee passes in front of Samsung Securities signage.
Business Korea



A total of 16 employees sold a combined 5.01 million shares, causing Samsung Securities stocks to tumble 11 percent in less than half an hour on Friday. These employees are buying their shares back. Samsung Securities has also promised to work together with authorities on the issue to strengthen preventative measures.

But all this is not going to undo the market confusion and chaos, industry watchers note. Further, those who sold off their shares when stock prices fell for no apparent reason could file a suit.

At 3 p.m. today, the Financial Supervisory Commission is scheduled to hold a meeting on the Samsung Securities situation, along with officials from related organizations including the Securities and Futures Commission and the Korea Exchange.

By Kim Ji-hyun (jemmie@heraldcorp.com)

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