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💫 What is a stock split?

News Explained

What is a stock split?

For this explanation we will use Chipotle company as a reference.

Define:

• A stock split is like cutting a pizza into smaller slices. It doesn’t change the total pizza, but instead of 8 slices, we can split our pizza into 100 pieces to offer more to everyone.

• A company that splits it’s stock to increase the number of shares available, makes the shares more affordable for investors without changing the overall value.

Key details to remember:

• The most common split ratios are 2-for-1 or 3-for-1. For a 3 for 1 split, for every 1 share you owned, you now own 3.

• A company elects to perform a stock split to intentionally lower the price of a single share, making the company's stock more affordable without losing value.

• A reverse stock split is the opposite transaction, in which a company lowers the amount of ‘pizza slices’ which results in an increased buy in price.

50-for-1 Stock Split: Should You Buy Chipotle Stock?

This is a huge announcement because a 50 for 1 stock split is well above the 3 for 1 standard.

Chipotle stock is currently near $3,000 per share. A 50 for 1 split would be near $60. (Simply divide $3,000 by 50.)

What happens if I already have shares?

For every 1 share you owned, you now own 50.

Should I buy?

Only consider buying if you see long term value in the company, aligning with your investment goals and risk tolerance.

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