Walmart, a big-box retailer, has said that it will divide its shares shortly. One of the most well-known firms to split its stock since Amazon and Alphabet did it in 2022 is this one. However, what does Walmart’s stock split mean for investors and why is it happening?
What is a stock split?
Put simply, a stock split happens when a business decides to issue additional shares of its current stock and lowers the price of those shares to make them more accessible for purchase throughout this process.
Ratios are used for splitting stocks; for instance, a 2-for-1 split divides each existing share into two shares, thereby doubling the total number of shares. Therefore, with a 2-for-1 split, you would have 20 shares, but each would be worth $5. Let’s say you had 10 shares prior to this hypothetical split, and each share was valued at $10.
How much is Walmart splitting its stock?
Walmart has announced that it will divide its common stock in a 3-for-1 stock split (ticker: WMT). This indicates that there will be three times as many outstanding WMT shares following the split as there are currently.
Does this mean the total value of my WMT shares will triple?
No. Your WMT shares’ total value will stay the same as it did right before the split. This is so because the value of the shares is divided by the same amount as the stock split when a stock splits. Each share’s value will only increase by one-third following the WMT split compared to its pre-split value. However, both before and after the split, the total value of your combined WMT shares will stay the same.
Does Walmart become a more valuable corporation after a stock split?
No, even though Walmart has three times more shares in circulation, its market capitalization stays the same since the entire value of individual investor’s shares is the same before and after the split.
why bother splitting the stock?
When a stock price hits a point where purchasing a single share becomes unaffordable for ordinary investors, a corporation usually splits its shares. For instance, when Amazon divided its stock 20 for 1 in 2022, its stock price was around $3,000 per share. This implied that prior to the split, ordinary investors were unable to afford to purchase even a single share.
Although WMT shares are currently trading close to all-time highs, at roughly $167, which means that many investors may still purchase a single share, Walmart claims that this is not at all about retail investors. It has to do with Walmart workers.
What role does the stock split play for Walmart employees?
Walmart stated when it announced the split that one of the driving forces was to lower the price of individual shares to make them more affordable for the company’s workers, who can buy shares by having their salaries automatically deducted from them. (Many large corporations have such employee stock purchase plans. According to Doug McMillon, CEO of Walmart, “Sam Walton thought it was critical to keep our share price in a range where all of our associates could purchase whole shares rather than fractions. We thought that it was a good moment to divide the shares and urge our associates to participate in the years to come as we consider our growth and future goals.”
When do Walmart shares split?
Walmart shares will be split 3-for-1 for individuals who are shareholders of record as of Thursday, February 22, 2024, close of business, following the market’s closing on Friday, February 23, 2024. On Monday, February 26, 2024, split-adjusted trading of WMT shares will start.