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Chipotle Mexican Grill’s stock was up 2.8% to $3,283 at market close Tuesday on the eve of the company’s historic stock split. The burrito chain’s 50-for-1 stock split is considered to be one of the biggest splits in the history of the New York Stock Exchange.
Investors who held Chipotle stock at the end of trading on Tuesday, June 18, received additional shares in their portfolio. In the 50-for-1 split, for every share held, investors received an additional 49 shares after the close of trading on June 25.
As of Wednesday morning, investors who previously owned a single share of Chipotle now have 50 shares worth $66 each.
What is a stock split?
The stock split makes shares more affordable for investors. Share prices are divided on an equivalent basis, so the split does not directly change the total dollar value of the investment. In a stock split, the company increases the number of shares, which reduces the share price. The total dollar value of all shares outstanding remains the same and doesn’t affect the company’s valuation.
To put it simply, it’s like dividing a pie into 10 pieces or 15 pieces: You still have the same amount of pie. In the same way, Chipotle’s current stockholders will receive a higher number of shares at lower prices. Prior to the stock split, Chipotle had around 27.4 million shares outstanding.
Chipotle reported strong earnings
The fast-casual restaurant chain, famous for its food experiments, recently tried out a new avocado-cutting robot. The company reported better-than-expected earnings for its first quarter, in part thanks to its rebranding and reintroduction of its braised beef barbacoa and al pastor chicken menu items.
Moreover, it reported a 14% increase in revenue and a restaurant sales increase of 7%. In the quarter, the company opened 47 restaurants, 43 of which have “Chipotlane” drive-thrus.