Shopify Stock Split: What should investors do?
Shopify Stock Split Introduction
Shopify Inc. is a Canadian multinational e-commerce company headquartered in Ottawa, Ontario. Recently it announced a stock split of 10:1 in the latest annual shareholder meeting.
What is a stock split?
- When a company divides its existing shares into multiple new shares, it is known as a stock split.
- Firms usually split their stocks when the stock price becomes too expensive and the company wants to make it more affordable to investors.
- A stock split only affects the share price and not the value of the company.
- Various companies have split their stocks in the past including Amazon and Apple.
Shopify Splits Stock 10:1
- Shopify split its stocks in a 10:1 ratio which means that its share price shall be divided by 10.
- This further means that the stock would reduce from $350 (on the day of announcement) to approximately $35. Currently, Shopify's stock price is trading at $33.05
- The stock split might help Shopify's stock price to revive after it had fallen by over 80% from its previous peak.
- Google plans for a 20:1 split in July and Tesla still awaits approval on its 3:1 stock split
What should investors do?
- Investors will end up with 9 additional shares for every one share they owned prior to the split.
- As we said earlier, the stock split will not change any business prospects for the future or affect earnings.
- With this, a higher number of retail investors can purchase Shopify shares and there shall be an increase in the number of shares available.
- Shopify stock had fallen by over 5.64% after the stock split announcement.
Analysts Recommendation
On the whole, Analysts have maintained their position to “buy”. Out of 29 analysts rating the stock, 11 have voted for “buy” while 7 have rated “strong buy”. 10 analysts have given a “hold” rating, while just 1 has given an “underperform”. Analysts are of the opinion that Shopify can benefit from the ongoing digital transformation on the lines of merchant solutions and subscription plans.
Is a split in stock good?
Stock splits are generally a sign that a company is doing well, meaning it could be a good investment. Also, since the price is low you can buy more shares for less amount.
Why did Shopify split its shares?
The company in its annual meeting said the “(stock split) will make ownership more accessible to all shareholders”
Do stocks go up after a split?
Stock splits do not necessarily increase the share price. After a split, the stock price will be reduced (because the number of shares outstanding has increased). In the example of a 2-for-1 split, the share price will be halved