The following research was contributed to by Christine Short, VP of Research at Wall Street Horizon.
Stock splits are gaining in popularity in 2024 as some companies try to make their stocks look more appealing to retail investors. With the rise of retail investors out of the COVID-19 pandemic came the need to be more appealing to this more active batch of investors. Walmart (1) and Nvidia (2) made it clear when they split their stocks this year, that the purpose was to be more accessible to a wide range of investors, including employees.
In Q2 2024 announced stock splits reached 100 (out of Wall Street Horizon’s universe of 11k global equities). This is the highest level of stock splits since Q2 2023 which reached 101. However, the first half of 2024 saw 168 split announcements, the highest for a first half in over ten years.
Traditional vs. Reverse Splits
While total stock splits are up, most of that volume is driven by reverse splits which have been outpacing traditional splits for years. A reverse split takes shares from an investor and replaces them with less shares, increasing the stock price, but the market value of the company remains the same. The motivation for this is likely to remain listed on certain exchanges by boosting the share price.
While Q3 isn’t completed yet, it’s clear from the first ten weeks of data that the splits trend continues. In July 2024 there were 30 split announcements (18 reverse, 10 traditional), that’s the most July split announcements in nine years of data. As things do, splits slowed a bit in August with 27 announcements, but that was still a high count historically speaking, with an average of 22 August split announcements for the 10 years.
More stock splits means investment teams need to properly adjust stock prices to reflect these corporate actions properly in order to conduct time-series analysis. TMX’s Price Adjustment Curve (PAC) provides price adjustments applicable down to tick level prices or even orders, and below you can see the number of recorded adjustments for North American splits have been steadily increasing. H2 2024 recorded 229 such price adjustments, the most in five years.
Biggest Stock Split Announcements YTD
Despite reverse splits being on the rise, traditional splits tend to get the most media coverage as they are usually enacted by large caps looking to lower the price of their stock to attract new investors. Some of the more notable traditional splits in 2024 include:
Walmart (WMT), 3-for-1, distributed February 23
Nvidia (NVDA), 2-for-1, distributed March 27
Chipotle (CMG), 2-for-1, distributed June 11
Broadcom (AVGO), 50-for-1, distributed June 25
Williams-Sonoma (WSM), 10-for-1, distributed July 12
Notable reverse splits for 2024 include:
Qiagen (QGEN), 24.25-for-25, distributed January 30
Rent the Runway (RENT), 1-for-20, distributed April 2
Buzzfeed (BZFD), 1-for-4, distributed May 6
New York Community Bank (NYCB), 1-for-3, distributed July 11
SITE Centers Corp (SITC), 1-for-4, distributed August 19
The Container Store (TCS), 1-for-15, distributed September 3
AllBirds (BIRD), 1-for-20, distributed September 4
The Bottom-line
While we are only two months into Q3 the momentum in stock splits continues. As corporations attract attention by announcing splits, it may be the case that more companies are encouraged to do the same. Traditional splits tend to be bullish for a stock price, with a one-year return of 25% from the date of the split announcement according to Bank of America.(3) This could encourage a broader range of companies, both in different market caps and industries, to try and utilize either the traditional or reverse flavor of this corporate action.
Sources:
(1) Walmart Announces 3-for-1 Stock Split, Walmart Inc., January 30, 2024, https://corporate.walmart.com
(2) NVIDIA Announces Financial Results for First Quarter Fiscal 2025, NVIDIA, May 24, 2024, https://nvidianews.nvidia.com
(3) Nvidia’s 10-for-1 stock split confirms ‘big tech is going bite-sized’ to lure retail investors—and it might signal more market-beating returns, BofA says, Fortune, Will Daniel, May 24, 2024, https://fortune.com
Wall Street Horizon provides institutional traders and investors with the most accurate and comprehensive forward-looking event data. Covering 9,000 companies worldwide, we offer more than 40 corporate event types via a range of delivery options from machine-readable files to API solutions to streaming feeds. By keeping clients apprised of critical market-moving events and event revisions, our data empowers financial professionals to take advantage of or avoid the ensuing volatility.
Christine Short, VP of Research at Wall Street Horizon, is focused on publishing research on Wall Street Horizon event data covering 9,000 global equities in the marketplace. Over the past 15 years in the financial data industry, her research has been widely featured in financial news outlets including regular appearances on networks such as CNBC and Fox to talk corporate earnings and the economy.
Twitter: @ChristineLShort
The author may hold positions in mentioned securities. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
