'Stock Split' Raising Flames... Warren Buffett Says He Won't Do It [Whisper]

EcoPro, a leading domestic secondary battery stock, saw its share price surge following news of a 1-for-5 stock split.

On the 8th, EcoPro closed at 648,000 KRW on the KOSDAQ market, up 69,000 KRW (11.92%) from the previous day. The stock had also surged 13.75% the day before.

On the 7th, EcoPro announced that it plans to implement a stock split, dividing one common share into five shares.

The par value will be lowered from 500 KRW to 100 KRW, and the number of issued shares will increase fivefold from 26,627,668 shares to 133,138,340 shares.

EcoPro plans to hold a board meeting later this month to approve the stock split proposal and submit it as an agenda item for the shareholders' meeting next month.

A stock split lowers the par value of shares while increasing the number of shares proportionally.

This is done when the stock price is excessively high, causing sluggish trading or difficulties in issuing new shares.

By splitting shares and lowering the price per share, trading activity can increase, potentially having a positive effect on the stock price.

Although the company's capital and fundamentals do not change, the increase in the number of shares outstanding can improve liquidity and supply-demand balance.

Another positive effect is that it becomes easier for the stock to be included in various indices. Since indices represent the market, they include stocks of companies that fit their criteria.

If a particular stock's price is too high or its volatility is unpredictable, it can negatively impact the index itself.

Another effect of a stock split is the defense of corporate control. Increasing the number of shares outstanding can reduce risks exposed during mergers and acquisitions.

Companies pursue stock splits to gain these advantages.

Large companies like Tesla have conducted multiple stock splits to lighten the weight of their stock prices.

On the other hand, some companies do not conduct stock splits even if their stock prices become heavy.

Warren Buffett, the 'investment genius' and chairman of Berkshire Hathaway, is famously reluctant to split his stock.

Berkshire Hathaway's Class A shares trade at about 800 million KRW per share (as of the closing price on the 7th).

Experts believe Buffett's reluctance to split shares stems from his value investing philosophy.

They see the high price of Berkshire Hathaway Class A shares as the result of Buffett's decades-long value investing approach.

While Berkshire Hathaway Class A shares are an extreme case, experts say that splitting shares into too small units is not always good.

This is because it can attract speculative investors who engage in abnormal trading, negatively affecting the stock price and management.

Experts say that since stock splits increase the number of shares without changing capital, they are not strongly related to stock price increases.

While stock splits can be a short-term factor for price increases, they are meaningless if there is no long-term improvement in performance or corporate value.

Past studies show that stock prices tend to rise sharply around the announcement date of a stock split, with average returns increasing up to about 60 days after, but then declining afterward.

This means the formula "stock split = stock price increase" does not always hold true.

Individual investors are encouraged to develop a keen eye for good companies and build healthy investment experiences through wise choices.