22 days ago • 2 mins
What’s going on here?
Walmart announced a three-for-one stock split this week, making it a lot cheaper for employees to pledge allegiance to corporate America.
What does this mean?
Walmart promises everyday Americans affordable groceries, clothes, and even home decor, proudly promoting the slogan, “Save Money Live Better.” The US retail giant’s stock was at odds with that mission, though, sitting around $165 per share. And because that meant many devoted employees and staunch Walmart supporters couldn’t afford more than a couple of shares, the retailer split its stock into three. So now, employees who already commit their working week to Walmart can sacrifice a chunk of their paychecks to pick up a whole stock for a third for the old price.
Why should I care?
The bigger picture: It’s all human psychology.
Companies consider splits when their stock becomes too successful, commanding a price tag so high that it puts retail investors off. By splitting the stock, the firm creates the illusion that the shares are better value – even though it would take three new $50 shares to match the ownership of a single old $150 one. Stock splits, then, don’t affect a company’s value by themselves: whether or not investors send the stock higher depends, as always, on profit alone. Tesla, for example, split shares three-for-one in August 2022, and the EV maker’s share price has only fallen some 60% since then.
For markets: More, more, more.
The 26 biggest US firms all have triple-digit stock prices, with Nvidia’s hanging all the way above the $600 mark. Now, some brokers do let retail investors buy fractions of a share, but not all of them. Plus, the ones that do can have off-putting limitations, like not being able to trade during the day and only knowing your price after the market’s closed. So watch this space: Walmart probably won’t be the only one to coax in retail investors by splitting its stock in the coming months.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.