2024 Stock Splits: A Rising Trend in Market Accessibility

Understanding Stock Splits and Their Current Trend

Stock splits are experiencing a resurgence in popularity as companies aim to make their stocks more attractive to retail investors. Following the activities of retail investors inspired by the pandemic, there has been a significant shift towards making shares more accessible. Noteworthy companies such as Walmart and Nvidia set the stage by implementing stock splits, demonstrating their commitment to engaging a broader investor base, including employees.

As of mid-2024, the financial landscape has witnessed an impressive 100 stock splits recorded in Q2 alone, as per Wall Street Horizon's analysis of over 11,000 global equities. This statistic marks a notable increase, surpassing the previous year's similar quarter, which saw 101 announcements. The first half of this year has already welcomed 168 split announcements, the highest figure recorded in over a decade.

Types of Splits: Traditional vs. Reverse

While the total volume of stock splits is climbing, it's crucial to note that reverse splits have consistently taken precedence over traditional splits in recent years. A reverse split functions by combining multiple shares into fewer ones, thereby raising the stock price without altering the company's overall market value. This strategy is often a necessity for companies striving to remain compliant with the listing requirements of certain exchanges.

Early insights from Q3 reveal a continuation of this trend. July 2024 recorded 30 split announcements, with 18 being reverse splits and 10 traditional splits, making it the busiest July for splits in nine years. Even in August, there was a noticeable dip to 27 announcements, yet historically, this remains above the ten-year average of 22 splits per August.

This heightened activity in stock splits signals the importance for investment teams to adjust stock prices accordingly to reflect these corporate actions. TMX's Price Adjustment Curve (PAC) has been diligently recording the price adjustments prompted by these splits. In H2 2024 alone, there were 229 such adjustments—marking the highest count in five years.

Highlights of Stock Split Announcements in 2024

Notably, while reverse splits are on the rise, traditional splits often attract the most attention from media and investors alike. Prominent companies that have announced traditional splits in 2024 include:

Walmart (NYSE: WMT), executing a 3-for-1 split in February.
Nvidia (NASDAQ: NVDA), enacting a 2-for-1 split in March.
Chipotle (NYSE: CMG), implementing a 2-for-1 split in June.
Broadcom (NASDAQ: AVGO), conducting a significant 50-for-1 split in June.
Williams-Sonoma (NYSE: WSM), rolling out a 10-for-1 split in July.

On the reverse split side, several companies also made headlines in 2024:

Qiagen (NYSE: QGEN), performing a 24.25-for-25 split in January.
Rent the Runway (NASDAQ: RENT), executing a 1-for-20 reverse split in April.
BuzzFeed (NASDAQ: BZFD), completing a 1-for-4 reverse split in May.
New York Community Bancorp (NYSE: NYCB), implementing a 1-for-3 reverse split in July.
SITE Centers Corp (NYSE: SITC), conducting a 1-for-4 split in August.
The Container Store (NYSE: TCS), enacting a 1-for-15 reverse split in September.
Allbirds (NASDAQ: BIRD), completing a 1-for-20 reverse split in September.

The Implications for Investors

As we navigate through Q3, the momentum generated by stock splits shows no signs of abating. With corporations amplifying their visibility through split announcements, there’s potential for other companies to follow suit. The data indicates that traditional splits usually correlate with bullish trends in stock prices. Bank of America notes the average returns from such announcements are around 25% over the year following the split announcement, implying that companies across varying sizes and industries may look to leverage either type of split to enhance visibility and attract investment.

Frequently Asked Questions

What are stock splits?

Stock splits are corporate actions that increase the number of outstanding shares by dividing existing shares into multiple ones, making the stock more affordable to investors.

Why are stock splits trending in 2024?

2024 has seen a rise in stock splits as companies aim to attract retail investors and make their shares more accessible following the heightened interest from investors post-pandemic.

What is the difference between traditional and reverse splits?

A traditional split increases the number of shares and lowers the stock price, while a reverse split reduces the number of shares and increases the stock price without affecting the company's total market value.

Which companies have made significant stock splits in 2024?

Notable companies include Walmart, Nvidia, Chipotle, and Broadcom for traditional splits, and Qiagen, Rent the Runway, and BuzzFeed for reverse splits.

How do stock splits affect investors?

Stock splits can make shares more accessible and potentially improve liquidity, often leading to increased interest and possibly enhanced stock performance over time.

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