• The Case of Split between ASUS and Pegatron

Abstract

This article studies the case of split between ASUS and Pegatron where ASUS officially announced the split in December, 2009. The split was practically carried out on June 1, 2010 with each 1,000 share holder of ASUS stock will then hold 150 and 404 shares of stock for ASUS and Pegatron, respectively. Such case of split/capital restructuring puzzled the market participants and the stock price of ASUS dropped to the trading floor two days in a row after the announcement. This paper first introduces the rise of ASUS and its core compentences, and then the issue between branding and OEM (original equipment manufacturer) for ASUS is discussed. Using this case as example, the teaching note of this paper leads students through the analyses of capital structure decision and business stragegy. Specific issues of focus includes why business choose to deduct their levels of capital and how to differenciate a business between OBM (own branding & manufacturing) and OEM. The teaching note also demonstrates the use of event study to quantify the stock market impact of the case.

Keywords: Capital restructuring, OBM vs. OEM, ASUS, Event study, Pegatron