Chipotle's Stock Breaks $3,000 on its Inaugural Stock Split

For the first time ever, Chipotle Mexican Grill’s stock broke above the $3,000 barrier, surging as much as 8% on Wednesday following the board approval of a 50-for-1 stock split. The firm is trying to lower the price of the shares for potential investors.

Due to robust demand for burritos and rice bowls among its comparatively affluent clientele, the California-based company’s shares have surged to all-time highs during the past year.

A stock split makes shares more accessible to ordinary investors by lowering their price without impacting the company’s valuation.

After the split, the company’s stock would trade at about $56, based on Tuesday’s closing price of $2,797.56. Approximately 27.4 million shares of Chipotle are outstanding.

The company’s shareholders will receive an additional 49 shares for each share held if the split is approved at the next annual meeting on June 6.

Chipotle’s value per share was the fourth highest on the S&P 500 index as of Tuesday’s close. It was worth $76.71 billion on the market.

The first split in the company’s thirty years “will make our stock more accessible to employees as well as a broader range of investors,” Chipotle’s Chief Financial and Administrative Officer Jack Hartung stated on Tuesday.

According to Thomas Hayes, chairman of hedge fund Great Hill Capital, “they’re also trying to do what Walmart has done in the sense that they want to give employees more economic ownership.”

The retail behemoth Walmart decided to split its shares three for one, which became effective on February 26. This move made the shares more accessible to its staff, who can choose to purchase the stock through payroll deductions.

“With the recent surge in the share price, the liquidity of Chipotle’s shares should be improved by the company’s stock split. If not, the business’s economics are still quite strong,” Northcoast Research analyst Jim Sanderson stated.

In January 2006, the fast-casual Mexican restaurant went public at a price of $22 per share.

The company has a higher forward price-to-earnings multiple (P/E) of 49.72 than its sector counterparts, Starbucks and McDonald’s, which have P/E ratios of 20.89 and 22.24, respectively. P/E is a typical benchmark for valuing equities.