Samsung Electronics Stock Price Dives Due to Note 7 Disaster

by Bien R. Gruba III / Sep 14, 2016 06:52 AM EDT
Samsung Electronics Stock Price Dives Due to Note 7 Disaster (Photo Credit: Jung Yun Je, Getty Images)

Samsung Electronics stock price took a nosedive falling to its lowest level in nearly two months on Monday after the Asian tech giant informed its customers to switch off and return their new Galaxy Note 7 smartphones due to fire-prone batteries Reuters reported.

Individual and institutional investors did a massive sell off Samsung shares wiping 14.3 billion off the South Korean firm's market capitalization as a series of warnings from regulators and airlines around the world raised fears for the commercial future of the flagship device.

The global smartphone leader on Saturday urged all customers to turn off their Note 7s and return them as soon as possible as part of the recall which it voluntarily initiated on Sept. 2.

"Some said initially the Galaxy Note 7 could be the best smartphone ever, but now it's possible the phone will go down as the worst ever," IBK Securities analyst Lee Seung-woo said to Reuters.

Reuters reported that Samsung Electronics' common shares were down 6.3 percent to 1,476,000 won each after touching their lowest level since July 12, 2016, and it seems the stock price is on track for their biggest daily percentage drop in more than four years.

Reuters said that analysts believe that the recall could spell disaster for Galaxy Note 7 sales and might have a lasting impact Samsung's brand image. It could also derail its recovery in the smartphone market share against rival Apple.

The Galaxy Note 7 recall is unprecedented for Samsung, which prides itself on its manufacturing technology. Apple, despite being its rival, buy some of the tech company's components. Some analysts estimate the firm might lose $5 billion won worth of revenue after accounting for recall costs. The company had said it had sold 2.5 million Galaxy Note 7s that need to be replaced.

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