Walmart’s decision to enact its first stock split since 1999 has caught the attention of investors as shares soar to record highs. Scheduled for the end of this week, Walmart (WMT) investors are preparing for a significant change in the company’s stock structure.
This move marks Walmart’s 12th stock split in 50 years, aimed at enhancing accessibility to its shares, particularly for its employees. Unlike previous splits, which were typically 2-for-1, this will be Walmart’s first 3-for-1 stock split.
Here’s how it works: Shareholders as of Thursday, Feb. 22, will receive additional shares after market close on Friday, Feb. 23. Trading on a post-split basis will commence on Monday, Feb. 26. While the split increases the number of outstanding shares to approximately 8.1 billion, it doesn’t alter the underlying value of investments in the company.
CFRA analyst Arun Sundaram views this action as “purely cosmetic” with no fundamental impact. Nevertheless, stock splits are often perceived as shareholder-friendly gestures and signals of confidence from the company’s management.
Walmart CEO Doug McMillon attributed the timing of the split to the company’s growth plans, including recent initiatives such as pay raises for store managers and investments in store modernization. McMillon emphasized Walmart’s commitment to inclusivity, echoing founder Sam Walton’s ethos of collective success.
Laurie Krigman, director at Babson College, outlines three reasons behind Walmart’s decision: signaling confidence, adjusting stock price to a preferred range, and enhancing liquidity. The move is seen as aligning with Walmart’s culture of value and accessibility.
Walmart’s stock has surged lately, hitting a record high after the earnings report and split announcement. The split is anticipated to broaden access to retail investors, potentially driving growth and multiple expansion, according to Jefferies analyst Corey Tarlowe.
However, historical performance following Walmart’s stock splits has been mixed. While some instances yielded positive returns, others resulted in declines. Krigman advises investors to focus on fundamentals and company performance rather than the stock split itself, emphasizing that economically, shareholders remain in the same position post-split.
In essence, Walmart’s stock split signifies a strategic move to foster inclusivity and accessibility while reflecting confidence in the company’s future. Yet, investors are reminded to maintain a focus on long-term fundamentals amidst the buzz of a stock split.
