Chipotle Mexican Grill’s stock jumped 8% on Wednesday, surpassing the $3,000 mark for the first time on record after the company announced a 50-for-1 stock split to make shares more affordable for investors.
The board of directors has never approved anything like this in the history of the company, and it will also be one of the biggest splits in the history of the New York Stock Exchange. It looks like the burrito chain company, known for experimenting with food options, is now trying something new with investors.
What is a stock split?
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, and you still have the same amount of pie.
In the same way, Chipotle’s stockholders will receive a higher number of shares at lower prices. So, if an investor owns Chipotle stock for $3,000, he or she will receive 50 shares worth $60 each after the stock split. Chipotle has around 27.4 million shares outstanding.
Still need approval from shareholders
Shareholders will vote on the move on June 6 during the annual meeting. If the split is approved, additional shares will be distributed on June 25 after market close.
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