Big-box retailer Walmart has announced it will soon split its stock. It will be one of the most high-profile companies to split its stock since Amazon and Alphabet split their stocks in 2022. But why is Walmart splitting its stock and what does that mean for investors? Here’s what you need to know.
What’s a stock split?
Simply put, a stock split is when a company plans to create more shares out of existing shares and in the process reduce its share price to make the shares more affordable to purchase.
Stock splits are done in ratios—for example, a 2-for-1 split means every existing share gets chopped in half, resulting in two shares. So if you own 10 shares before the split in this hypothetical example, and each share is worth $10, after the 2-for-1 split, you would own 20 shares, but each share would only now be worth $5.
How much is Walmart splitting its stock by?
Walmart said it will split its common stock (ticker: WMT) in a 3-for-1 stock split. That means that after the split, there will be three times as many WMT shares in existence as there are today.
So stock owners will have three times the shares after the split?
Yes. So say you own 1,000 shares of WMT today. After the date of the 3-for-1 split, you will now own 3,000 shares of WMT stock.
Does that mean the total value of my WMT shares will increase three times?
Nope. The total value of your WMT shares will stay what they were right before the split. This is because when a stock splits, the value of the shares is divided by the same amount the stock is splitting by.
After the WMT split, each share will be worth just one-third of what they were before the split. But the total value of your combined WMT shares will remain the same pre-split and post-split.
Does the stock split make Walmart a more valuable company?
No. Just as the total value of an investor’s shares pre- and post-split will remain the same, Walmart’s market cap will remain the same even though there are now three times as many shares in the company.
Why bother splitting the stock then?
Usually, a company splits its stock when its stock price reaches a level that makes it look too expensive on a psychological level for retail investors to buy even one share. For example, Amazon’s stock price was nearly $3,000 per share when it did a 20-for-1 stock split in 2022. That meant even if a retail investor had $2,000 to invest, they couldn’t buy a single share of AMZN before the split.
But while WMT shares are trading near an all-time high, they are still hovering around $167 at the time of this writing—which doesn’t put a single share out of reach of that many investors. Walmart says one of the main reasons it’s splitting its stock isn’t about retail investors at all. It’s about Walmart employees.
What do Walmart’s employees have to do with the stock split?
In a statement announcing the split, Walmart revealed that a driving factor behind the move is that the company wants to make individual shares cheaper so they are more accessible to the company’s employees, who can purchase shares by having money automatically deducted from their paychecks. (These types of employee stock purchase plans are common at many large companies.)
As Walmart CEO Doug McMillon explained, “Sam Walton believed it was important to keep our share price in a range where purchasing whole shares, rather than fractions, was accessible to all of our associates. Given our growth and our plans for the future, we felt it was a good time to split the stock and encourage our associates to participate in the years to come.”
When do Walmart shares split?
WMT shares will split 3-for-1 after the market closes on Friday, February 23, 2024, for those who are shareholders of record at the close of business on Thursday, February 22, 2024. WMT shares will begin trading at their split-adjusted price on Monday, February 26, 2024.
Recognize your brand’s excellence by applying to this year’s Brands That Matter Awards before the early-rate deadline, May 3.
