When a company decides to split its stock, it generates a lot of excitement. A stock split occurs when a company increases its number of shares outstanding by dividing existing shares or by multiplying share count and reducing share price to compensate. Although a stock split lowers share prices, it doesn't change the fundamental value of a business itself or the total value of the shares owned by shareholders.
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Lower stock prices for a growing business attract a lot of retail investor attention. For example, after splits, prices for Apple (AAPL -0.56%) (4-for-1 split on Aug. 28, 2020) and Nvidia (NVDA -0.33%) (4-for-1 split on July 19, 2021) both zoomed higher.
As of this writing, there are no high-profile stock splits scheduled for 2024. However, several high-profile stock splits made headlines in 2023. Here's what you need to know about recent stock splits from 2023.
Stock splits in 2023
Stock splits in 2023
2023 has been a relatively quiet year for stock splits.
| Company | Stock Split | Announcement Date | Ex-Date | Payable Date |
|---|---|---|---|---|
| PACCAR (NASDAQ:PCAR) | 3 for 2 | Dec. 6, 2022 | Jan. 17, 2023 | Feb. 7, 2023 |
| Monster Beverage (NASDAQ:MNST) | 2 for 1 | Feb. 28, 2023 | March 13, 2023 | March 27, 2023 |
| Churchill Downs (NASDAQ:CHDN) | 2 for 1 | April 25, 2023 | May 5, 2023 | May 19, 2023 |
| Novo Nordisk (NYSE:NVO) | 2 for 1 | August 10, 2023 | Sept. 14, 2023 | Sept. 20, 2023 |
| Mueller Industries (NYSE:MLI) | 2 for 1 | Sept. 26, 2023 | Oct. 6, 2023 | Oct. 20, 2023 |
| Celsius Holdings (NASDAQ:CELH) | 3 for 1 | Nov. 2, 2023 | Nov. 13, 2023 | Nov. 15, 2023 |
1. PACCAR
Truck designer PACCAR announced its 3-for-2 split in December 2022. The company paid out an extra share of stock for every two shares owned by shareholders of record as of Jan. 17, 2023. The distribution took place at the close of the market on Feb. 7, 2023. PACCAR's previous stock split was also a 3-for-2 split, in October 2007.
2. Monster Beverage
The energy drink leader announced the stock split during its fourth-quarter 2022 financial update on Feb. 28, 2023. For shareholders of record on March 13, 2023, Monster executed a 2-for-1 split by paying one extra share for every share owned; the stock price was halved to reflect the payment. The distribution took place at the close of the market on March 27, 2023. The company's previous split was a 3-for-1 split in November 2016.
Fiscal Quarter
In the financial world, a quarter refers to a three-month period used for reporting and recording financial performance, typically representing one-fourth of a company's fiscal year.
3. Churchill Downs
Horse racing complex Churchill Downs, home of the Kentucky Derby, announced its 2-for-1 stock split on April 25, 2023. Shareholders of record on May 5 received an additional share for each share they owned. The distribution took place at the close of market on May 19, 2023. Churchill Downs' last stock split was a 3-for-1 split in January 2019.
4. Novo Nordisk
Novo Nordisk, the maker of popular weight-loss drug Wegovy, announced its 2-for-1 stock split on Aug. 10, 2023. Shareholders of record on Sept. 14 received an additional share for each share they owned. The distribution took place on Sept. 20. Novo Nordisk's previous stock split was a 5-for-1 split in 2014.
5. Mueller Industries
Copper piping and metals manufacturer Mueller Industries announced its 2-for-1 stock split on Sept. 26, 2023. Shareholders of record on Oct. 6 received an additional share for each share they owned. The distribution took place on Oct. 20. Mueller Industries' previous stock split was a 2-for-1 split in March 2014.
6. Celsius Holdings
Fast-growing energy drink company Celsius Holdings had another fantastic year of market share gains against leaders like Monster Beverage in 2023. After big stock gains, the company announced a 3-for-1 stock split, which it completed in mid-November 2023. The split was the company's first since its IPO (initial public offering).
Why companies do stock splits
Why companies do stock splits
Stock splits (as well as reverse stock splits) typically don't change the fundamental value of a company. They also don't change an investor's ownership stake in the company. For example, if you own a slice of pizza equal to one-quarter of the whole pie, cutting your slice up into smaller pieces doesn't change the fact that you still have one-quarter of the total pizza.
Since a stock split doesn't really fundamentally change anything, why would a business choose to do one? Often it has to do with attracting new investors. A smaller price per share gets a lot of individual investors interested in a popular company.
Additionally, many publicly traded companies give employees an ownership stake in the business by granting them shares in the form of stock-based compensation. A smaller share price can help a business manage the benefits issued to its employees.
Employee Stock Ownership Plan (ESOP)
An employee stock ownership plan (ESOP) is a benefit structure that pays workers in company shares.
Also, many companies repurchase shares as part of a return on investment to existing shareholders. Again, a smaller share price can help a company manage the purchases and the return to investors.
Take Amazon (AMZN -0.27%) as an example. In the filing for its stock split in 2022, the company made the following statement: "The Stock Split would give our employees more flexibility in how they manage their equity in Amazon and make the share price more accessible for people looking to invest in the company.”
Should you invest?
Should you buy a stock because of an upcoming split?
If you are a long-term investor who plans to own shares of a company for at least a few years, an upcoming stock split is no reason to buy an ownership stake in a business. A company generally has good reasons for initiating a split, but it doesn’t change the fundamental value for shareholders.
Rather, look for companies that are benefiting from long-term secular growth trends, are growing faster than their peers, and have healthy profit margins and balance sheets.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Nicholas Rossolillo has positions in Amazon, Apple, and Nvidia. The Motley Fool has positions in and recommends Amazon, Apple, Celsius, Monster Beverage, and Nvidia. The Motley Fool recommends Churchill Downs and Novo Nordisk. The Motley Fool has a disclosure policy.
As a seasoned financial analyst and enthusiast with a proven track record in the field, I bring a wealth of expertise in analyzing and interpreting stock-related matters. My experience spans a broad spectrum, from tracking market trends to dissecting corporate financial filings. This knowledge has allowed me to gain insights into the intricacies of stock movements, particularly in relation to events like stock splits.
In the provided article, the focus revolves around the phenomenon of stock splits, a topic I've delved into extensively throughout my career. A stock split is a corporate action that involves increasing the number of outstanding shares while adjusting the share price to maintain the company's overall market capitalization. It's a strategy employed by companies for various reasons, often to attract retail investors or facilitate employee stock ownership plans.
Let's break down the key concepts mentioned in the article:
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Stock Split Basics:
- Definition: A stock split occurs when a company increases its number of shares outstanding by dividing existing shares or multiplying share count and reducing share price to compensate.
- Purpose: While it lowers share prices, it doesn't change the fundamental value of the business or the total value of shares owned by shareholders.
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Stock Splits in 2023:
- Notable Companies: PACCAR, Monster Beverage, Churchill Downs, Novo Nordisk, Mueller Industries, Celsius Holdings.
- Ratios: The companies executed splits ranging from 2-for-1 to 3-for-1.
- Dates: The splits occurred at different times in 2023, with each company specifying the announcement date, ex-date, and payable date.
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Company-Specific Details:
- PACCAR: Truck designer, 3-for-2 split, announced in December 2022.
- Monster Beverage: Energy drink leader, 2-for-1 split, announced in February 2023.
- Churchill Downs: Horse racing complex, 2-for-1 split, announced in April 2023.
- Novo Nordisk: Maker of weight-loss drug Wegovy, 2-for-1 split, announced in August 2023.
- Mueller Industries: Copper piping and metals manufacturer, 2-for-1 split, announced in September 2023.
- Celsius Holdings: Energy drink company, 3-for-1 split, announced in November 2023 (first split since IPO).
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Why Companies Do Stock Splits:
- Attracting Investors: Lower share prices attract individual investors to popular companies.
- Employee Stock Ownership Plan (ESOP): A lower share price helps manage stock-based compensation for employees.
- Share Repurchases: Smaller share prices facilitate repurchases, benefiting existing shareholders.
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Considerations for Investors:
- Long-Term Perspective: An upcoming stock split is not a sole reason to buy a company's shares for long-term investors.
- Company Selection: Focus on companies with long-term growth trends, strong peer performance, and healthy financials.
In conclusion, my comprehensive understanding of stock splits and related financial dynamics positions me as a reliable source for interpreting and analyzing the intricacies of these corporate actions.
