Walmart (NYSE:WMT), America’s largest retailer by revenue, is in the spotlight after the company announced that it would enact a 3-for-1 stock split. Shareholders of record as of the market close on Feb. 22 will receive two additional shares for each share held after the market close on Feb. 23. Afterwards, WMT stock will begin trading on a split-adjusted basis beginning on Feb. 26. This marks the company’s first stock split since 1999.
“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,” said CEO and President Doug McMillon. “Given our growth and our plans for the future, we felt it was a good time to split the stock and encourage our associates to participate in the years to come.”
Walmart added that the stock split would also make it easier for its employees to purchase shares due to a lower price tag. The company has 2.1 million employees globally, over 400,000 of whom participate in the Walmart Associate Stock Purchase Plan.
WMT Stock: Walmart Announces 3-for-1 Stock Split
Since Walmart became a publicly traded entity in 1970, the retailer has initiated a total of 11 2-for-1 stock splits but never a 3-for-1 split. Following the stock split, the amount of WMT stock outstanding will increase to 8.1 billion from 2.7 billion. This will help increase WMT’s liquidity.
Furthermore, the announcement could help increase the price of WMT. According to Morgan Stanley, companies that announce a stock split outperform the S&P 500 by an average of 2.4% between the date of the announcement and the day that a stock begins trading on a split-adjusted basis. In the following six months after a stock is split, the shares outperform the index by an average of 4.7%. These conclusions were pulled from data spanning from 2000 to 2021.
“Outperformance has moderated over the last decade but is still positive,” said Morgan Stanley strategist Boris Lerner in 2021.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
