NVIDIA, Chipotle, Broadcom, Walmart... US Stock Market Faces Stock Split Frenzy

Recently, as the US stock market surged, major companies have been consecutively implementing stock splits.

According to Bloomberg on the 23rd (local time), there are a total of 10 companies that have conducted or are about to conduct stock splits this year. Representative companies include Nvidia, Chipotle, Broadcom, and Walmart.

[Image source=AP Yonhap News]

Bloomberg predicted that if companies continue to split their stocks at the current pace, it will reach the highest level in over a decade.

The period when stock splits were most active in the US stock market was during the 1980s and 1990s. In 1986 alone, 114 companies conducted splits.

The reason companies undertake stock splits is that while the company's valuation itself does not change, the number of shares increases and the price per share decreases, making it easier for investors to purchase. In theory, increased trading volume makes it easier for the company's value to rise. However, since fractional share trading became possible, the entry barrier for ordinary investors has lowered, leading to a decrease in stock splits.

Bloomberg analyzed that the recent stock split boom is characterized by the purpose of promoting employee stock purchases rather than temporary stock price increases.

A representative case is the Mexican fast-food chain Chipotle. Chipotle's stock is scheduled to be split 50-for-1 on the 26th. On the 21st, Chipotle closed at $3,210.49 per share (approximately 4.46 million KRW).

Forty percent of all Chipotle employees can purchase company stock at a discounted price up to 15% of their salary. Additionally, employees with over 20 years of service receive a one-time stock grant. However, currently, the stock price exceeding $3,000 makes it difficult to purchase company stock. Jack Hartung, Chipotle's Chief Financial Officer (CFO), explained, "(The stock split) can flexibly provide employees with appropriate nominal units," adding, "(Currently) even if you want to give someone $2,000 or $5,000 worth, you can't. You have to round up or down."

Semiconductor equipment manufacturer Lam Research also plans to split its stock to expand employee stock purchases. On the 21st, Lam Research recorded $1,050.35 per share (approximately 1.46 million KRW). CFO Douglas Bettinger said, "We want to increase employee participation in stock purchases," adding, "Employees said the stock price is so high that they can't even buy a single share."

Nvidia, Walmart, and Broadcom also cited expanding employee stock purchases as one of the main reasons for their stock splits.