 |
By Park Hyong-ki
Splitting up stocks to make them cheaper and easily accessible for more investors with smaller pockets seems to be a good idea for companies seeking to boost their trading and value.
But the general trading patterns after companies decided to issue more shares to their shareholders and investors show stock splits are becoming more a curse than a blessing.
Blue chips that split their stocks such as Samsung Electronics and Naver have fallen faster than they have rebounded.
Samsung Electronics, the biggest stock, has dropped 13 percent since May 4 when it resumed trading after its stock split, despite its stellar earnings on the back of strong semiconductor sales.
It began trading at more than 50,000 won ($48) in May, but now is down to 44,000 won, according to the Korea Exchange (KRX). Before the split, the tech giant was valued at 2.5 million won per share.
Naver, the biggest search portal, is suffering the same fate as Samsung as its shares have been performing poorly since it resumed trading after a stock split, Oct. 12. Naver is trading at around 127,500 won, down from 142,000 won. As a result, Naver lost its place in the top 10 in terms of market cap.
In July, Naver announced its split decision, saying the purpose was to give more opportunities for investors to invest in the "future" of the company. Before the split, Naver's price was 700,000 won per share _ too expensive for the average retail investor.
But the two stocks became targets of short-sellers, betting their prices would fall amid a weak business outlook and the fall of U.S. tech shares such as Apple and Amazon, according to analysts.
An average of more than 20 percent of Samsung and Naver shares have been "victims" of short-selling, according to the KRX.
Inexpensive share prices following their splits, compounded with targets of short-selling and the gloomy outlook have increased their volatility, analysts say.
"It may take a while for Naver to see a short-term rebound in earnings given the increasing costs to finance its new businesses such as artificial intelligence, and to support Line," said Hwang Sung-jin, an analyst at HMC Investment Securities.
Line is Naver's mobile messenger subsidiary incorporated in Japan that is expanding into financial technology services.
Naver is expected to see a 3.6 percent decrease in its operating profit in the third quarter amid the increased costs, according to the analyst.
Also, Samsung Electronics is faced with market concerns over semiconductor overcapacity.
"Samsung and SK hynix could reduce their capacity in line with slowing demand expected for DRAM memory chips," said Choi Do-yeon, an analyst at Shinhan Investment.
Of 32 stocks that resumed trading on the KOSPI after their share splits, only seven saw their prices "slightly increase" this year, according to the KRX.
The others, including Samsung and Naver, have declined an average of 4 percent.
This is in stark contrast to Apple, which saw an increase of 31 percent after its share split in 2014; and Tencent Holdings, a Chinese tech conglomerate, that also saw its price increase by 36 percent after doing so the same year.
![[INTERVIEW] Choi Min-sik, Lee Dong-hwi on creating Korean-style noir with 'Big Bet'](https://img.koreatimes.co.kr/upload/thumbnailV2/8b795a8f6b42492db4e8fdc47e9abd8d.jpg/dims/resize/178/optimize)
