July 18, 2024

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Chipotle’s Stock Split Happens This Week. Here’s What to Expect.

2 min read

Chipotle Mexican Grill (NYSE: CMG) is doing something it’s never done before in its 30-year history. The company is splitting its stock, with the operation scheduled for this week. The decision came after the shares soared in the triple digits over the past few years, reaching beyond $2,000 last year and past $3,000 this year.

The reason for such enormous gains? This fast-casual restaurant has reported quarter after quarter of growth — even excelling during early pandemic days thanks to its digital ordering system — and has built a brand that keeps customers coming back. Now, the stock split will bring the per-share price of this high-flying stock down, making it more accessible for a broad range of investors.

Let’s take a look at what to expect — and consider whether this restaurant giant is a buy.

An investor standing inside a modern building smiles while looking at a tablet.

Image source: Getty Images.

Why launch a stock split?

First, a few points about stock splits in general. These operations involve issuing more shares to existing shareholders to lower the price of each individual share. They are purely mechanical and don’t change a company’s market value, the value of your holding, or the valuation of the stock. This means they don’t serve as a catalyst for stock performance — investors won’t rush out to buy a stock just because it’s announced a stock split.

That said, a stock split is generally positive for a company over time because it makes it possible for investors who want to make a small purchase to do so without relying on fractional shares. And these operations also suggest a company is optimistic about its future, with the idea that the stock, from its new level, can once again take off.

The new share price is determined by the ratio of the split, and this brings me to the subject of the Chipotle operation. In one of the biggest stock splits in New York Stock Exchange history, Chipotle will offer current holders 49 shares for every one share they own. Shareholders will receive the shares after the June 25 market close, and the…

2024-06-24 04:50:00

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