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Chipotle stock will undergo a 50-for-1 split after markets close Tuesday, with shareholders receiving 49 additional shares for every share they previously owned.
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The first day of Chipotle’s split trading will be on Wednesday.
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The split will lower the cost of each individual share and could make the shares more accessible to Chipotle employees and a broader range of investors.
Chipotle Mexican Grill (CMG), investors will soon see a much larger number of shares in their portfolios after Chipotle’s stock undergoes a 50-to-1 split after markets close on Tuesday, with investors getting 49 new shares for every share 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 mostly risen since, although they fell late last week and Monday morning.
Why Chipotle is splitting its stock
Shares of Chipotle have risen steadily since the company’s public debut in 2006, with an IPO price of $22 per share. Shares are up more than 57% in the past year, after closing above the $2,000 mark for the first time in April 2023.
Recently, the company has managed to continue reporting strong profits despite a broader slump in discretionary spending that has also been felt by other fast-food giants such as McDonald’s.MCD). However, fast casual chains like Chipotle and Sweetgreen (S.G) have been able to resist the trend of price reductions.
When the split was announced in March, Chipotle CFO Jack Hartung said the company wanted to make its shares more accessible to a broader range of investors, especially Chipotle employees, by trading at a lower price. The chain also said it planned to offer a special one-time stock 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 on 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 cap.
For example, if Chipotle shares traded at $3,194.50 before the split, an investor who owned one share before the split would hold 50 shares priced at $63.89 each after the split. The first day of Chipotle’s split trading will be on Wednesday.
Chipotle’s stock split also comes just weeks after tech giant and artificial intelligence (AI) darling Nvidia (NVDA) conducted its own 10:1 stock split earlier this month. Nvidia shares rose after the split, briefly making Nvidia the most valuable company in the world by market cap, but they fell late last week and on Monday.
Shares of Chipotle were down 0.7% at $3,194.50 as of 2:30 PM ET on Monday, though they have risen nearly 40% since the start of the year, closing at a record high of $3,427.61 last Tuesday before closing later the week decreased.
Read the original article on Investopedia.
