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Key Takeaways
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Chipotle stock is set to undergo a 50-for-1 split after markets close Tuesday, with shareholders receiving 49 additional shares for each share they owned previously.
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The first day of Chipotle’s split-adjusted trading will be on Wednesday.
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The split will lower the cost of each individual share and could make the stock more accessible to Chipotle’s employees and a wider range of investors.
Chipotle Mexican Grill (CMG) investors will soon see a much larger number of shares in their portfolios after Chipotle stock undergoes a 50-for-1 split after markets close Tuesday, with investors gaining 49 new shares for each one they owned before the split.
The fast-casual chain announced plans for a 50-for-1 stock split in March, and the move was approved by shareholders at its annual meeting earlier this month. Shares rose after the initial announcement and have largely gained since, though they declined late last week and through Monday morning.
Why Chipotle Is Splitting Its Stock
Chipotle shares have climbed steadily since the company’s public debut in 2006, with an initial public offering (IPO) price of $22 per share. Shares are up more than 57% over the last year after first closing above the $2,000 mark in April 2023.
Recently, the company has managed to continue reporting strong earnings despite a broader pullback on discretionary spending that has been felt by other fast food giants like McDonald’s (MCD). However, fast casual chains like Chipotle and Sweetgreen (SG) have been able to resist the trend of lowering prices.
When the split was announced in March, Chipotle CFO Jack Hartung said the company wanted to make its stock more accessible to a wider range of investors, especially Chipotle employees, by trading at a lower price. The chain also said it planned to offer a special one-time equity grant, a type of stock compensation, to general managers and employees with more than 20 years at Chipotle to promote employee ownership of the stock.
How the Split Will Work
The new shares will be distributed after markets close Tuesday, resulting in 50 times as many shares at a lower price per share, without changing the total value of investors’ Chipotle holdings or the company’s market capitalization.
For example, if Chipotle shares were trading at $3,194.50 before the split, an investor holding one share before the split would hold 50 shares priced at $63.89 each after the split. The first day of Chipotle’s split-adjusted trading will be on Wednesday.
Chipotle’s stock split also comes just weeks after tech giant and artificial intelligence (AI) darling Nvidia (NVDA) performed its own stock split at a 10:1 ratio earlier this month. Nvidia shares rose following the split, briefly making Nvidia the world’s most valuable company by market cap, but they declined late last week and into Monday.
Chipotle shares were 0.7% lower at $3,194.50 as of 2:30 p.m. ET Monday, though they’ve gained nearly 40% since the start of the year, and closed at a record high of $3,427.61 last Tuesday, before slipping later in the week.
Read the original article on Investopedia.
