Starting Monday, the trading of shares for South Korea’s tech giant Samsung Electronics will be suspended for three business days, in the course of a first-ever stock split action, according to the nation’s bourse Korea Exchange on Sunday.

While the 50-for-1 stock split is intended to activate transactions and to boost shareholder value, many observers also suggested that the positive consequences are likely to remain limited.

As the local stock market is to be closed on Tuesday in celebration of Labor Day, trading will resume on May 4, when the face value of the company’s shares will be lowered from the current 5,000 won ($4.66) to 100 won.

The stock split was approved by the board of directors in January, as part of efforts to expand the ordinary retail investors’ access to the market’s top cap company and to consequently promote shareholders’ value.

The tech giant has kept up strong momentum in recent years on the back of robust sales of memory chips and smartphones in the global market. 

For the first quarter this year, the company posted a record-high operating profit of 15.64 trillion won and a consolidated revenue of 60.56 trillion won, up nearly 20 percent on-year.

The stock split is expected to expand the number of the company‘s common stocks from 128.3 million to 6.41 billion or more, while leaving its market capitalization unchanged, according to officials.

Samsung’s shares were trading at 2,650,000 won in Friday’s closing, up 43,000 won or 1.65 percent from the previous session.

“The larger the market capitalization, the greater the expected increase in trading volume (caused by the stock split),” said Choi Chang-gyu, analyst at NH Investment and Securities.

Out of the 39 cases of stock split on the main Kospi market, 24 have led to growth in the overall transaction volume, according to the expert.

Some observers, however, also warned against excessive expectations.

“As may often be marked in past similar cases, the sharp rise in stock prices in the wake of the (stock split) announcement would soon slow down,” said Kim Dong-won, analyst at KB Securities.

“The general expansion of investor base will nevertheless bring a positive effect by boosting liquidity in the market.” 

By Bae Hyun-jung  (tellme@heraldcorp.com)