Of the Korean companies a US investor can buy on the New York Stock Exchange, SK Telecom Co., Ltd. (KRX:017670, NYSE:SKM) has the strangest unit. Each American depositary share represents five-ninths of one common share.
Not a half. Not a quarter. Five-ninths.
That number is not a design choice, it is a residue, and the story behind it is worth knowing because it also explains why SKM's long-term price chart is close to useless.
Until 28 October 2021, each SK Telecom ADS represented one-ninth of a common share, which was already an awkward denominator but at least a round-ish one for a stock trading around ₩300,000.
On that date the company carried out a consolidation. Shareholders on the register were allotted 0.6073625 of a modified common share for each share they held — the corporate action that split the group in two, leaving SK Telecom with the network and moving the semiconductor and platform investments into a separate listed company, SK Square. The listing change and re-listing followed on 29 November 2021.
The depositary adjusted the ADS ratio at the same time, from one-ninth to five-ninths. Nine went into the denominator for reasons dating to the 1990s; five came out of the 2021 arithmetic. Nobody sat down and chose 0.5556.
The practical effect today: at the ₩99,600 Korean close, one SKM ADR represents about ₩55,333 of Korean stock. The ₩830 quarterly dividend arrives as roughly ₩461 per ADR.
The practical effect on any chart spanning 2021 is worse. An SKM price series that isn't carefully adjusted shows a discontinuity no shareholder actually experienced, and even a correctly adjusted one is comparing two different companies — the pre-2021 SK Telecom owned assets that today sit inside SK Square. Anyone modelling SKM against a decade of its own history is modelling a business that stopped existing in that form five years ago.
For anyone keeping track of the pattern across Korean ADRs: KB Financial and Shinhan Financial are one-for-one, KT is one-half, POSCO Holdings is one-quarter, SK Telecom is five-ninths. Five large Korean companies, four different denominators, no convention, and nothing in the ticker to warn you.
The board declared ₩830 a share for the second quarter, the same as the first. Annualise it and you get ₩3,320 against a ₩99,600 close — a 3.33% gross yield. The company's stated policy is to direct more than 50% of consolidated net income to shareholder return.
Korea then withholds. Dividends to non-residents are taxed at a statutory 20% before local surtax, capped at 15% for portfolio holders under the United States–Korea income tax convention, deducted before the depositary converts anything. That takes 3.33% to about 2.83% — roughly 50 basis points a year.
There is a route around that in Korea, and SK Telecom has just built one.
The 2026 annual meeting approved reducing capital reserves by ₩1.7tn and transferring the amount to retained earnings. The balance sheet shows it happening: other paid-in capital moved from negative ₩12,131.3bn at the end of December to negative ₩13,859.5bn at the end of June, a shift of ₩1,728.2bn, while retained earnings rose ₩2,282.1bn against first-half net income of only ₩782.4bn. The two movements are the same transaction seen from either side.
Cash distributed from a reduced capital reserve is legally a return of capital rather than a distribution of profit. Korea's tax authority has taken the position that such payments to non-resident individuals and foreign corporations are not Korean-source dividend income and therefore are not subject to withholding at all. KB Financial and Shinhan Financial ran the same manoeuvre this year at ₩7.5tn and ₩9.9tn respectively.
The difference is timing. Korean reporting on SK Telecom's meeting says the tax-free treatment would apply from 2027, not 2026. That characterisation comes from coverage of the AGM agenda rather than from a company filing I've read, so treat the year as reported rather than confirmed. What is confirmed, from the balance sheet, is that the ₩1.7tn moved.
If it does apply from 2027, a US holder of SKM keeps the full 3.33% instead of 2.83%. That's about 15% of the income on the position, recovered by a shareholder resolution.
The other thing a US screener will show you about SKM is a price-to-book of roughly 1.39x — market capitalisation of ₩21.39tn against equity attributable to the parent of ₩15,436.6bn. Against KT's 0.72x, that reads as the market paying a substantial premium for SK Telecom's growth story.
Look at how the denominator got there.
Parent equity rose ₩2,573.5bn in the first half, from ₩12,863.1bn. First-half net income was ₩782.4bn. So the equity grew by more than three times what the company earned.
The gap is a mark-to-market. Long-term investment assets went from ₩3,188.6bn to ₩5,847.3bn — up ₩2,658.7bn in six months. Other equity components, where fair-value gains on investments held through other comprehensive income accumulate, rose ₩2,019.6bn. Deferred tax liabilities rose ₩613.5bn. Add the last two together and you get ₩2,633.1bn, which accounts for the ₩2,658.7bn asset movement to within 1%.
So roughly ₩2.02tn of SK Telecom's ₩2.57tn increase in book value is an unrealised gain on a portfolio of investments, net of the tax that would be owed if they were sold. The telecom business contributed ₩782.4bn of earnings and paid out about half of it.
The half-year summary statements don't say what the portfolio holds. That's a real limitation on this analysis and I'd want the note before drawing conclusions about how durable the gain is.
Two things follow either way. First, the equity a US investor divides into when computing price-to-book is now about 38% long-term investments rather than network assets, and that share grew sharply this year. Second — and this cuts against the premium reading — the revaluation made SK Telecom look cheaper, not richer. On the December balance sheet, the same ₩21.39tn market capitalisation would have been 1.66x book. A quarter of the apparent multiple compression since then came from the accountants, not the market.
The withholding treatment on the first 2027 dividend. If SK Telecom designates it against the reduced capital reserve, gross and net will match on a US holder's statement and the position is worth 50 basis points a year more than it was. If 15% still comes off, the ₩1.7tn was about distributable-profit capacity and nothing else.
Second, the long-term investment assets line against ₩5,847.3bn in the third-quarter report. A gain that reverses takes book value back down with it, and the price-to-book that looks like 1.39x today would print materially higher on a weaker mark — without anything happening to the network, the subscribers or the dividend.
Third, whether the quarterly rate moves off ₩830. It has now been held for two quarters through a period when net income more than doubled, which suggests the board is smoothing rather than tracking. On a stated policy of returning over half of consolidated net income, a full-year profit anywhere near the annualised first-half figure would imply room to raise it.
kstock reads DART every morning and writes up what moved — the contract, the buyback, the number that does not add up. The daily post and a Saturday roundup, by email.