For U.S. investors sour on Apple, buying Samsung is tricky

Thu Jan 24, 2013 4:03pm EST
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By David Randall

NEW YORK (Reuters) - U.S. retail investors who have gone sour on Apple Inc after the drubbing the stock has been taking may want to think twice before trying to buy its main smartphone rival, Samsung Electronics Co Ltd, at least in American markets.

Apple's market value dropped by about $50 billion on Thursday as disappointing results, due to weak holiday sales of its iPhone, sent shares plummeting more than 11 percent. [ID:nL1N0ASI0B] Samsung's success in taking market share with its cheaper smart phones is seen as a major reason for Apple's problems, making the South Korean company an obvious alternative for investors.

Yet Samsung, with a market capitalization of $236 billion, is not listed as an American Depositary Receipt (ADR) on major U.S. markets like other foreign companies such as Toyota Motor Corp and Sony Corp. Instead, an unofficial version of Samsung trades under the ticker on OTC Markets Group, colloquially referred to as the Pink Sheets.

Opting for Samsung's unsponsored shares, which trade on what's formally called the Grey Market, gives a U.S. investor nearly all the traditional benefits of owning the South Korean-listed version of Samsung shares, including dividend payments, though they might not give voting rights.

But low trading volume and high bid/ask spreads might make it hard for investors to sell shares quickly if something goes wrong. It is also hard to buy a position on good news.

An average of only 195 unsponsored Samsung shares have traded over the past five days, according to Thomson Reuters data, compared with an average of 271,053 locally listed Samsung shares on the South Korean market during the same period. The lack of liquidity could add costs such as higher brokerage fees and outdated price quotes when an investor wants to buy or sell.

"You get no information during the day on how much trading there is, so when you put in an order to your broker you might get something quite different than what you were expecting," said Allan Nichols, an international telecom equity analyst at Morningstar who covers the company.

Samsung did not respond to requests for comment. The company is due to report fourth-quarter results on January 25. Its shares have gained 24.2 percent in the last six months.   Continued...

A passerby photographs an Apple store logo with his Samsung Galaxy phone on the morning iPhone 5 goes on sale to the public in central Sydney September 21, 2012. REUTERS/Tim Wimborne