Investors in Chipotle (CMG) woke up to a pleasant surprise as the burrito giant executed a historic 50-for-1 stock split, marking its first split ever and setting a record on the New York Stock Exchange. This move, according to Chipotle’s CFO Jack Hartung, aims to make the company’s shares more accessible to a wider range of investors, including its own employees.
Here are some key highlights and implications of Chipotle’s stock split:
– Shareholders who held the stock as of the market close on June 18 received 49 additional shares for each one they owned.
– The split means that shares that were worth $3,283.04 per share pre-split will now trade as 50 shares at approximately $65.66 per share.
– Despite the split, Chipotle’s post-split stock price remains higher than its initial public offering price when it went public in 2006 at $22 per share.
– Previously, Chipotle stock was the third highest-priced stock in the S&P 500, only trailing behind NVR, Inc. and Booking Holdings. However, the split has significantly lowered the entry point for new retail investors.
Analyst Danilo Gargiulo suggests that while the stock split offers more accessibility to retail investors who may have been deterred by the high price pre-split, it may also expose the stock to higher volatility. Although Chipotle is unlikely to become a meme stock like GameStop, the split could introduce fluctuations in its trading.
Moreover, approximately 4,000 Chipotle employees, including long-serving restaurant general managers and crew members, are set to benefit from a special one-time equity grant to mark the stock split. This grant will vest over three years, giving employees a stake in the company’s success.
Chipotle is not alone in conducting stock splits this year, with Walmart also recently completing a 3-for-1 stock split. Historically, companies that initiate stock splits tend to see positive returns in the year following the split, outperforming the broader market averages.
In conclusion, Chipotle’s groundbreaking stock split not only democratizes its shares but also fosters a sense of ownership among its dedicated employees. As the company navigates this new chapter post-split, it will be interesting to see how the market responds to these changes and how Chipotle continues to thrive in the ever-evolving landscape of the stock market.
