Chey Tae-won, chairman of SK Group, recently hinted at the possibility of a stock split for SK hynix(000660), saying, "If there are more requests from shareholders, we can fully review it," drawing attention to the potential impact on the share price.
A stock split means dividing the face value of existing shares to increase the total number of shares outstanding. It has the advantage of improving access for individual investors to stocks whose per-share price has been too expensive, creating a high entry barrier. When the per-share price falls, order flow tends to concentrate, sometimes serving as a short-term catalyst for a rise in the stock price.
However, because the fundamental value of corporations remains unchanged, some note that a stock split itself should not be taken as an unconditional positive for the share price.
According to the Korea Exchange (KRX) on the 13th, based on the closing price that day, the per-share price of SK hynix was 1,845,000 won, the second most expensive in the domestic market. The most expensive stock is Hyosung Heavy Industries (2,666,000 won). Even at the start of the year, SK hynix shares were 677,000 won, but they have risen 172.5% through recently. As the share price surged, the per-share price once easily topped 2 million won and even soared to a peak of 2,919,000 won.
When the per-share price becomes too expensive like this, the possibility of a stock split is always raised. A stock split means dividing the par value of existing shares by a set ratio to increase the total number of shares issued. For example, one share priced at 1 million won with a par value of 1,000 won could be split into 10 shares priced at 100 won by dividing it into 10. In this case, the number of shares increases, but the fundamental value of corporations remains the same.
A representative case is the stock split carried out by Samsung Electronics in 2018. Samsung Electronics, whose per-share price had approached 2.6 million won in the past, conducted a 50-for-1 stock split, reducing the par value from 5,000 won to 100 won and increasing the number of shares by 50 times. Nvidia also carried out a 10-for-1 stock split in 2024, bringing the per-share price down from $1,200 to $120.
A stock split lowers the per-share price and has the effect of promoting stock trading. In the case of Samsung Electronics as well, on the day it was relisted after the 2018 stock split, trading volume surged more than 100 times, setting a daily volume record.
Nam Gil-nam, senior research fellow at the Korea Capital Market Institute, said, "If the share price is too high and liquidity is low, transactions tend to dry up and the price discovery function weakens," adding, "There is a possibility that access for small investors will improve."
However, a stock split does not guarantee a rise in the share price. That is because the value of corporations has not changed.
For Samsung Electronics, the last closing price before the stock split was 2.65 million won on Apr. 27, and it began trading at 53,000 won on May 4. However, until it reached the 80,000-won range during the COVID-19 period in 2022, the share price moved sideways in the 40,000–60,000 won range. In particular, one year after the stock split, the share price had fallen by about 13%. The slowdown in the semiconductor industry played a large role.
Heo Jae-hwan, a researcher at Eugene Investment & Securities, said, "When a stock split event occurs, it can be easier for individual investors to participate and liquidity increases, so there may be a temporary effect of a share price rise," adding, "However, while it does boost liquidity, it is correct to see little effect on the fundamental value of corporations."
A securities industry source said, "A stock split is an event that increases investment access and liquidity rather than an event that raises corporate value," adding, "The long-term share price trajectory of SK hynix should be seen as determined by fundamentals such as expanded investment in artificial intelligence (AI), growth in the high-bandwidth memory (HBM) market, and improved earnings."