(Bloomberg) — Chipotle Mexican Grill Inc.’s historic stock split proposal highlights the enormity of this year’s bull run by showing just how far the fast-food chain must go to put its stock within the reach of those who enjoy its affordable burritos.

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The 50-for-1 split announced Tuesday will be one of the largest ever on the New York Stock Exchange if shareholders approve it at Chipotle’s annual meeting on June 6, the California-based company said. If approved, the stock will begin trading on June 26 after the split.

While the move won’t change anything about the company other than the price per share, it still created excitement: Chipotle’s shares soared to new highs, building on a record run that has sent the stock up more than 26% this year.

“Chipotle’s 50-to-1 stock split is unheard of,” said Howard Silverblatt, a Wall Street veteran with nearly half a century of experience as a senior index analyst at S&P Dow Jones Indices. “I’ve never seen anything of this magnitude before. It’s unusual.”

A stock split simply divides a stock into multiple parts, without changing its overall value or ownership pool. Companies pursue splits – or reverse splits, which do the opposite – largely for perception reasons. When a share price is too high, it can deter private investors. If it’s too low, it can make a company look cheap in a distasteful way.

Splits fell out of favor as buying fractional shares became more popular recently, Silverblatt explains. Last year, only four companies in the S&P 500 Index conducted a stock split. But with stock markets soaring in 2024, there’s more of an optics problem for companies with eye-popping stock prices. Although only two companies have officially split their shares this year, companies are realizing this could create more demand for retail customers because the shares have a lower dollar value.

“The big question now is: will stock splits return?” said Silverblatt.

Sticker shock

Chipotle’s rationale for the split is to make its stock “more accessible” to employees and a broader range of investors. At nearly $2,900, one share of Chipotle is more expensive than the average American homeowner’s monthly mortgage payment. A 50-to-1 split would lower Chipotle’s stock to about $60 from Friday’s closing price, which looks more like a takeout order.

The two S&P 500 companies that split their shares this year had similar statements. Cooper Cos. Inc., which sells health care products including contact lenses, completed a 4-for-1 split in February. Discount retail giant Walmart Inc. soon followed with a 3-for-1 split. Old Dominion Freight Line then announced a 2-for-1 split that will take place at the end of March.

In addition to the purpose of removing the shock from stock prices, the splits have the potential to expand the investor pool, increasing liquidity and demand. Walmart hit a record after the split, even as major Walton Family shareholders sold $1.5 billion worth of stock.

“If Chipotle is going to split the stock, let’s get it back to a reasonable price,” said Thomas Martin, senior portfolio manager at Globalt Investments, who is overweight the stock. “Even though prices have risen with inflation, people are still willing to pay for the burritos! We love this stock and we are going to run with it.”

Stunning size

Chipotle’s stock split proposal attracted particular attention because of its size.

Outside of a few larger splits related to stock offerings, Chipotle Berkshire Hathaway’s adjustment is the largest, according to data compiled by Bloomberg. Berkshire’s 50-for-1 split of its B shares in 2010 was part of its acquisition of the Burlington Northern Santa Fe railroad.

“I thought I read it wrong,” Ken Mahoney, president and CEO of Mahoney Asset Management, said of seeing Chipotle’s announcement. “I was on Twitter when it first broke and people always make jokes on Twitter,” referring to the platform X by its former name.

Chipotle had little choice but to pursue a massive split if it wanted to make its shares accessible to the masses. It is the fourth-highest priced stock in the S&P 500, behind AutoZone Inc., Booking Holdings Inc. and NVR Inc.

Who’s next

Some market participants expect Nvidia Corp. is the next one eligible for a stock split.

The market-leading artificial intelligence darling is up about 90% this year, building on a record run in 2023 and past the level at which it last announced a stock split in 2021. The chipmaker’s shares are above record highs from early March. but it still trades for over $900 per share.

Read more: Nvidia looks set for a stock split after $1 trillion rally (1)

“It’s very difficult to predict stock splits,” says Mary Ann Bartels, chief investment strategist at Sanctuary Wealth. “But the higher the price, the better value for money if you want to encourage individual retail investor participation in your shares.”

—With help from Tom Contiliano.

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