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Nvidia's Upcoming Stock Split: What Investors Need to Know

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Moomoo News Global joined discussion · Jun 5, 2024 14:01
Nvidia announced its sixth stock split, with shares set to trade at one-tenth their current price starting June 10, 2024. Before the Q1 2024 earnings call on May 22, when the split was revealed, NVDA closed at $949.50. Since then, the stock has surged past the $1,150 mark, reaching all-time highs. To be eligible for the split shares, investors must own the stock by the market close at 4 pm ET on June 6, 2024. Nvidia's last 4-for-1 split in May 2021 sent shares skyrocketing over 500%, and investors are buzzing with excitement for what’s next.
What are the reasons behind Nvidia's decision to split its stock?
The primary reason behind this decision is to make stock ownership more accessible to employees and retail investors by lowering the share price. This increased accessibility allows more people to invest in the company, making it easier for employees and smaller investors to buy whole shares instead of fractional ones. Nvidia noted that the move aims to correct the inequity created by high stock prices, which can put shares out of reach for many potential investors.
Nvidia's Upcoming Stock Split: What Investors Need to Know
How the split will work?
For Nvidia's upcoming stock split, there are several key dates that investors need to keep in mind. If you own shares of $NVIDIA (NVDA.US)$ by 4 pm ET on June 6, 2024, you will receive nine additional shares for each share you hold. The closing price of Nvidia's stock on June 7, 2024, will be divided by ten to determine the new share price. The split-adjusted shares will begin trading at the new price when the market opens on Monday, June 10, 2024.It's important to note that the stock split will not change the overall value of your holdings; it's simply a different way of dividing your ownership. You will likely see adjustments to your brokerage account between the market close on June 7 and the market open on June 10. No action is required on your part for your shares to be split. Additionally, Nvidia has announced a 150% increase in cash dividends, from $0.04 to $0.10 per share, which translates to a $0.01 per share dividend on the post-split shares.
How does a stock split impact share performance?
Although a stock split does not add any intrinsic value or voting power for shareholders, it is often seen as a bullish signal. Investors typically view it as a sign that management anticipates a promising financial future for the company. The split will result in shareholders receiving nine additional shares for each share they own, trading at one-tenth of the original price. This does not fundamentally change the company's operations or market value but reflects Nvidia's commitment to making its stock more flexible and attainable for a broader range of investors.
Nvidia's Upcoming Stock Split: What Investors Need to Know
How will the stock option be impacted after the split?
Investors holding options contracts on Nvidia stock might wonder how these will be affected by the upcoming stock split. Rest assured, the Options Clearing Corporation (OCC) ensures that the value of your options remains unchanged post-split. Your existing options will be adjusted to reflect the new share structure, maintaining their tradability and exercisability.
Nvidia's Upcoming Stock Split: What Investors Need to Know
Nvidia's Upcoming Stock Split: What Investors Need to Know
Post-split, you'll have ten times the number of options contracts, each with a strike price that is one-tenth of the original. For example, if you had one option contract with a strike price of $1,000, post-split, you will have ten contracts with a strike price of $100 each. This adjustment ensures that the total value of your options remains the same, similar to turning one voucher into ten, each with one-tenth the buying power, preserving your rights and investment value.
Which company will be the next to announce a stock split?
Bank of America has identified 36 S&P 500 companies with stock prices above $500 that may be candidates for stock splits. Among them are $Broadcom (AVGO.US)$ , $Super Micro Computer (SMCI.US)$ , $ServiceNow (NOW.US)$ , and $Netflix (NFLX.US)$ . $Booking Holdings (BKNG.US)$ , with shares over $3,500, is also a prime candidate, especially after initiating a dividend earlier this year. The list spans various sectors, including $AutoZone (AZO.US)$ , $Regeneron Pharmaceuticals (REGN.US)$ , and $Eli Lilly and Co (LLY.US)$ , all with high share prices. Notably, $Chipotle Mexican Grill (CMG.US)$ recently announced a historic 50-to-1 split, highlighting the trend.
Nvidia's Upcoming Stock Split: What Investors Need to Know
Source: moomoo, Bloomberg, Yahoo Fiance, Nvidia
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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