Canadian tech giant Shopify Inc. (NYSE: SHOP) is the latest company planning a stock split with the goal of getting more retail investors to be part of its shareholder base. On Monday, April 11, Shopify announced that they plan to do a 10-for-1 stock split which will have to be approved by their shareholders during the June 7 meeting.
If the shareholders approve the first stock split in the company’s history, it will go through on June 22. CEO Tobi Lutke would manage to preserve his voting power through a special provision that will be part of the stock split deal.
After Covid enforced lockdowns, Shopify’s business surged due to consumers being forced to shop online. This paradigm shift was also reflected in the latest earnings report, which showed that revenue grew by 41% compared to the same quarter in 2020.
Market disregards the stock split news
Shopify’s move concerning the stock split comes after companies like Tesla (NASDAQ: TSLA), Google (NASDAQ: GOOG), and Amazon (NASDAQ: AMZN) announced stock splits of their own. Finbold reported on how the announcement of these stock splits affected the share price of the companies.
Though other companies in 2022 which announced stock splits had a price increase, SHOP stock received only a 2.5% increase on Monday, closing at $617.38. This year the shares have lost 55% of their value and are trading below 20-50-200-day Simple Moving Averages (SMAs).
Analysts give the stock a moderate buy rating with the average price target for the next 12-months of $982.44, a potential increase of 59.13% from the current trading price of $617.38.
The decline in the stock price has more to do with the current investing environment, which has punished tech and growth stocks more than others.
Inflation, energy, and food price hikes will play a major role in stock prices, but splitting stocks might attract more retail buyers. Industry-leading position, increased revenue, and plans to grow will further ease the decision to either invest or pass on the stock.
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