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What Does Chipotle’s Stock Split Mean for Investors?

The dominant fast-casual chain’s stock carries a fair value estimate of $40 per share following its 50-for-1 split.

In this Feb. 8, 2016, file photo, shows a sign for the Chipotle restaurant in Pittsburgh's Market Square. Chipotle shares, under siege after a series of food scares erupted just over a year ago, are surging before the opening bell Wednesday, Sept. 7, after activist investor Bill Ackman revealed that he's become the taco chain's second largest investor.
Securities In This Article
Alphabet Inc Class A
Tesla Inc
Alphabet Inc Class C
Broadcom Inc
Walmart Inc

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.

Chipotle Mexican Grill Stock Price

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.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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