What Does Chipotle’s Stock Split Mean for Investors?

On June 25, Chipotle Mexican Grill CMG enacted a 50-for-1 stock split—one of the biggest in the history of the New York Stock Exchange.

Shareholders received 49 additional shares of the fast-casual chain’s stock for each one they own. Additionally, “the firm will offer a one-time equity grant for both its restaurant general managers and its crew members with more than 20 years of service,” according to Morningstar senior equity analyst Sean Dunlop.

This is Chipotle’s first stock split. When the split was announced on June 6, one share of the company sold for about $3,100-$3,200. Following the split, shares will trade for around $65.

Why Do Companies Split Their Stock?

A stock split means each share is divided into multiple new ones. While this increases the number of outstanding shares, it does not change a stock’s overall value. Companies tend to make such moves when their stock price has risen to the point where it might be difficult for individual investors to purchase shares.

Having a larger number of cheaper shares to attract more buyers can help improve liquidity, and lower prices can have the psychological impact of making shares more attractive, even though the company’s underlying value hasn’t changed.

Date for Chipotle’s Stock Split

Investors received their additional shares after the market closed on June 25. Shares began trading on a post-split basis when the market opened on June 26.

What Does Chipotle’s Stock Split Mean?

Before the split, Morningstar’s fair value estimate for Chipotle stock was $2,050 per share. Dunlop has adjusted that estimate to $40. He believes the shares remain overvalued, and that the equity grant will have “a negligible dilutive impact.”

Other Recent Stock Splits

Chipotle is the third company to announce a high-profile stock split in the past month—Broadcom AVGO announced a 10-for-1 split, while semiconductor powerhouse Nvidia NVDA did a 10-for-1 split. Walmart WMT enacted a three-for-one split in February, while Alphabet GOOGL/GOOG, Tesla TSLA, and Amazon AMZN split shares in 2022.