A brokerage staffer at Samsung Securities, one of South Korea’s biggest brokerages, made a mistake and gave away 1,000 company shares to each employee. He was trying to issue employees their share in dividends as part of the company’s compensation plan. Rather than giving the 1000 won ($1.20) to each employee, he ended up giving 1,000 Samsung Securities shares to each employee instead. It was a total of 2.83 billion shared and cost over $105 billion.
Bloomberg says that’s more than 30 times the company’s current market value. Samsung Securities tool 38 minutes to fix the mistake. But, 16 employees had already sold their shares which led to market value dropping 12 % in just a few minutes. This was the biggest drop in value for the company ever since the global financial crisis almost a decade ago.
The company tried its best to rectify the problem but the damage was already done. South Korea’s pension fund stopped using the services of the company. The company punished the 16 staff members who sold their shares and will repay the shareholders who lost money due to the stock drop.
“We are going to compensate investors who suffered losses in the widest possible way,” Koo Sung-hoon, chief executive of Samsung Securities, was quoted as saying in a company statement according to Bloomberg. There still has been no word from the company about the employee who made the mistake in the first place.
“This doesn’t make sense at all,” the petition on the Blue House website cited one person, who wasn’t identified, as saying. “Employees sold shares even though they knew it was wrong. This is the worst case of moral hazard. An overall inspection of brokerages is needed.”
The reputation of the company is not the only thing on the line. According to Bloomberg, the South Korean government is considering removing Samsung Securities entirely from the list of bond dealers. “We can’t rule out the possibility that some investors will leave the market,” Hwang said. “Confidence in the stock market has been severely damaged.”
We will have to wait and see how it pans out and how it will affect the future business of the company. You can check it out in the video below: