Walmart's 3-for-1 stock split: What to know (2024)

FAQs

What is Walmart's 3-for-1 stock split? ›

"Sam Walton believed it was important to keep our share price in a range where purchasing whole shares, rather than fractions, was accessible to all of our associates," McMillon wrote. With a three-for-one stock split, each old share becomes equal to three shares.

A 3-for-1 stock split means that for every one share held by an investor, there will now be three. In other words, the number of outstanding shares in the market will triple. On the other hand, the price per share after the 3-for-1 stock split will be reduced by dividing the old share price by 3.

The short answer is it doesn't matter, and here's why. As mentioned earlier, a stock split doesn't change the value of the company or the value of an investor's holding. If you buy one share today or 10 shares after the split, you'll be investing the same amount of cash.

One way is to buy shares of the company before the reverse split occurs with the plan to sell them soon afterwards. This can be profitable if the company's stock price increases after the split. Another way to make money from a reverse stock split is to short sell the stock of the company.

After the split, the company's fair value estimate will be adjusted to $49 per share to account for the threefold increase in its outstanding shares. Walmart's wide economic moat rating will be unaffected. The stock will still be rated 2 stars (meaning it's considered overvalued), trading at a premium of 18% as of Feb.

Disadvantages of a Stock Split

A company cannot rely on a stock split to increase its value or market cap. A stock split divides the existing shares, thus keeping the market cap the same as before. Not to forget, a company must invest some amount to conduct a stock split.

While the number of shares owned changes after a stock split, the split itself does not change your investment value.

From time to time, stock splits are followed by a bump in stock performance—but not always. Is the split worth it? – Stock splits have no tangible impact on a company's total value—they simply create more shares at more affordable prices.

A reverse stock split may be used to reduce the number of shareholders. If a company completes a reverse split in which 1 new share is issued for every 100 old shares, any investor holding fewer than 100 shares would simply receive a cash payment.

You have two basic options. You can buy the shares beforehand while the price per share remains high. You will likely hope to profit from a rise in the share value with the excitement surrounding the stock. You can also elect to wait until after the split and then take advantage of the lower price per share.

Should I sell my stock after a reverse split? ›

Selling before a reverse stock split is a good idea, but selling after the reverse stock split is not. Since you can sell before and after a reverse stock split, selling during one is optional. The main advantage of selling before the reverse stock split is that you don't have to wait around for it to happen.

The split resulted in existing investors' shares tripling as the price per share was cut by two-thirds, keeping Walmart's total shareholder equity the same while cutting its stock price from $175.56 to $58.52 as of Friday's closing share price.

Walmart's common stock will begin trading on a post-split basis at the market open on Monday, Feb. 26, 2024, under the company's existing trading symbol “WMT.” The stock split and final ratio were approved by Walmart's board.

Let me say right off the bat that it's probably not a great idea to buy Walmart shares just because of the upcoming stock split. Nothing will change about the company's underlying prospects when it increases the number of outstanding shares. Yes, stock splits can sometimes cause a stock to jump.