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Investors finally realize how bad the situation is for Samsung
Following a flurry of regulatory warnings about the Galaxy Note 7, Samsung Electronics’ shares took a beating today on the Korea Exchange.
Samsung’s stock saw its biggest intraday drop since 2012, plummeting 7.6 percent. When the 3.9 percent drop from Friday is taken into account, the loss in market value amounts to a staggering $19 billion.
This is the biggest drop for Samsung since it announced the massive Note 7 recall at the beginning of the month. Investors appeared to take the news in stride initially (Samsung’s shares actually grew in the days following the recall announcement), but the gravity of the situation is finally setting in.
Over the weekend, Samsung changed the wording of its Note 7 recall notice pages, “strongly advising” customers to power down and exchange their devices immediately. Before, Samsung announced the recall, but did not urge customers to actually stop using the Note 7.
The change of tone comes as the Consumer Product Safety Commission became involved with the Note 7 recall, which – among other measures – makes it illegal to sell the device anywhere in the United States.
The bigger blow came from airlines though, as aviation authorities from around the world issued advisories against using or carrying the Note 7 on board of planes. Major airlines from around the world are now asking passengers to power down their Note 7’s, and, in at least one case, the “ban” was extended to all Samsung devices.
Announcement on my flight last night: Please power off all @SamsungMobile phones. Unintended consequences of #Note7Recall— Tim McDonough (@timamcdonough) September 10, 2016
Meanwhile, a Note 7 allegedly burst into flames in the hands of a 6-year boy from New York. The child was rushed to the hospital with burns on his body, though the severity of his injuries is unknown. The incident comes after exploding Note 7’s were associated with the destruction of a Jeep and a garage in the US.
In this climate of fear and uncertainty, Samsung is struggling to expedite its recall process. The company said it’s working to ship the first Note 7 units with new batteries as soon as next week.
But even if Samsung manages to extinguish this fire soon, the damage to its reputation has to be tremendous. Regardless of how well Samsung handles the situation, the Note 7 may remain in the consumers’ memory as the phone that catches fire. And that’s on top of the monetary damage that Samsung is incurring, which was initially estimated at $1 billion. According to analysts cited by Reuters, Samsung could be facing revenue losses of up to $5 billion.
Has the Note 7 recall changed how you view Samsung?