Written by Sabyata Mishra
(Reuters) – Chipotle Mexican Grill shares topped the $3,000 mark for the first time in history on Wednesday after the burrito chain's board approved a 50-for-1 stock split aimed at lowering the stock price. is expensive for potential investors with an increase of up to 8%.
The California-based company's stock has soared to record levels over the past year, driven by strong earnings from strong demand for burritos and rice bowls among its relatively affluent customer base.
A stock split lowers the price of the stock without affecting the company's valuation, making it more affordable for individual investors.
Based on Tuesday's closing price of $2,797.56, the company's stock would trade for about $56 after the split. Chipotle has approximately 27.4 million shares outstanding.
If the split is approved at the company's annual general meeting on June 6, shareholders will receive an additional 49 shares for each share they own.
As of Tuesday's close, Chipotle's per-share value was the fourth-highest in the S&P 500 index. The market value was $76.71 billion.
Jack Hartung, Chipotle's chief financial and administrative officer, said Tuesday that the split is the first in the company's 30-year history and will give “more access to our stock to a broader range of investors, not just employees.” It will be easier,” he said.
“They're trying to do what Walmart has done in terms of giving more economic ownership to their employees,” said Thomas Hayes, chairman of Great Hill Capital, a hedge fund.
Retail giant Walmart has implemented a 3-for-1 stock split, effective February 26, to make stock more affordable for employees who can purchase shares through payroll deductions.
“Given the stock's rise over the past few years, Chipotle's stock split should ease stock liquidity,” said Jim Sanderson, an analyst at North Coast Research. “Otherwise, the economics of the business are It remains attractive.”
The fast-casual Mexican chain went public in January 2006 at $22 per share.
The company's forward price-to-earnings ratio (P/E), a common metric for stock valuation, is 49.72 times, compared with 20.89 times and 22.24 times for peers such as Starbucks and McDonald's, respectively.
(Reporting by Savyata Mishra in Bengaluru; Additional reporting by Bansari Mayur Kamdar; Editing by Tasim Zahid)
