The historical 50 for 1 split of Chipotle's stock has now taken effect. Find out how this will affect investors, employees' benefits, and the company's prospects.
Chipotle Mexican Grill (CMG) recently completed one of the most extensive stock splits in New York Stock Exchange history, a 50 for 1 split. Investors need to be aware of this critical change.
Those who owned Chipotle stock as of June 18 received 49 additional shares for each share they held. The stock currently trades on a post-split basis, with one pre-split share of about $3,283.04 trading as 50 post-split shares, each valued at around $65.66.
There are a couple of main reasons for the split.
Chipotle wants to make its shares more readily available to employees and a wider range of investors.
While the split provides a new entry point for retail investors, it may expose the stock to some degree of volatility. Chipotle CFO Jack Hartung told investors he believes this will make shares more "accessible to our employees as well as a broader range of investors" on a call following the company's first quarter results.
According to Bernstein analyst Danilo Gargiulo, the split won't turn Chipotle into a meme stock like GameStop but could lead to more fluctuations. On the one hand, this new entry point allows "more access to retail investors" who may have shied away from the high price before the split, Gargiulo said. But on the other hand, "the stock could be exposed a little bit more to some level of volatility," he warned.
"I don't think it's ever going to be a meme stock, like GameStop (GME) or others in the past, but I think it does expose a little bit to more fluctuations," Gargiulo added. Andrew Charles said the firm believes Chipotle is "well positioned to deliver mid-single digit same-store sales annually over the medium term”
In celebration of the stock split, approximately 4,000 Chipotle employees, including long-serving restaurant managers and crew members, will receive a special one-time equity grant. Eligible US employees can participate in the Employee Stock Purchase Plan (ESPP) to buy shares at a discount.
Nvidia (NVDA) recently conducted a 10-for-1 stock split, and Walmart (WMT) implemented a 3-for-1 split. Historically, stock splits have been positive for companies, with an average return one year later exceeding that of the broader market.
While stock splits do not significantly change a company's value, Chipotle's move is designed to free up ownership and increase investor participation. In the coming months, watch how this historic split impacts the fast-casual giant’s trajectory.
