HomeBusinessChipotle jumps on its first-ever stock split as shares hover at record...

Chipotle jumps on its first-ever stock split as shares hover at record highs

(Reuters) – Shares of Chipotle Mexican Grill soared in premarket trading on Wednesday after the burrito chain’s board approved a 50-to-1 stock split.

Shares rose about 6% and were trading around $2,950 before the bell.

Shares of the California-based company have soared to record levels over the past year, driven by strong profits driven by solid demand for burritos and rice bowls among its relatively wealthier customer base.

A stock split lowers the price of shares without affecting the company’s valuation, making them more affordable for individual investors.

If the split is approved at the upcoming annual meeting on June 6, Chipotle shareholders will receive an additional 49 shares for each share held.

The stock closed Tuesday at $2,797.56, making it the fourth highest per share in the S&P 500 index. The market value was $76.71 billion.

The split, the first in its 30-year history, “will make our shares more accessible to both employees and a broader range of investors,” said Jack Hartung, Chipotle’s chief financial and administrative officer.

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A Chipotle Mexican Grill employee prepares food on Tuesday, Dec. 15, 2015, in Seattle.  Chipotle founder and CEO Steve Ells visited restaurants in the Pacific to discuss new food safety protocols with employees after an E. coli outbreak sickened 50 people in the Northwest.  (AP Photo/Stephen Brashear)

A Chipotle Mexican Grill employee prepares food on Tuesday, Dec. 15, 2015, in Seattle. (AP Photo/Stephen Brashear) (ASSOCIATED PRESS)

Based on Tuesday’s closing price, the stock would trade around $56 per share after the split. The company has approximately 27.4 million shares outstanding.

“Chipotle’s stock split should ease liquidity in the stock given how high the stock price has risen in recent years. Otherwise, the company’s economics remain just as compelling,” said Jim Sanderson, an analyst at Northcoast Research.

Its forward price-to-earnings (P/E) ratio, a commonly used measure for valuing stocks, is 49.72, higher than peers including Starbucks and McDonald’s, which have P/E ratios of 20.89 and 22.24, respectively to have.

(Reporting by Savyata Mishra in Bengaluru; Editing by Tasim Zahid)

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