What Does the Chipotle Mexican Grill (CMG) Stock Split Mean for You?

Today is the day. Chipotle (NYSE:CMG) will be finally be splitting its stock on a 50-for-1 basis. This means that investors will receive an additional 49 shares for every one they own after the market closes today. For those curious about what this Chipotle stock split will mean for the stock moving forward, there’s undoubtedly plenty of reason to be bullish. Stock splits are typically a positive for companies that have seen their share prices rise to levels that may preclude some investors from participating and buying a particular stock. With shares of CMG stock currently trading hands above the $3,200 level at the time of writing, buying even a single share can be difficult for many smaller investors. And given that not all brokerages and trading firms allow for partial shares to be owned, this means a much more centralized investor base. With the company’s share price set to decline to the $65 level after market close today, we’re likely to see a broader investor base form. However, there are other reasons why investors may be bullish on CMG stock heading into this split. Let’s dive into why the stock is up more than 1% today and where the stock may be headed from here. Anticipation Builds Around Chipotle Stock Split Mathematically speaking, stock splits don’t matter much for a company in terms of its overall valuation. Splitting a stock is an exercise in cutting a given pie into smaller pieces. That’s all it really is. However, for companies like Chipotle that have never split their stock, this can be indicative of a very positive outlook moving forward. Typically, companies that split their stock believe that significant price appreciation is on the horizon. This is a positive signal sent to the market (the opposite of a reverse split, used to maintain a given listing). Additionally, shareholder compensation packages for management, executives and all employees can be better carried out at a lower stock price. Options traders will also suddenly have the ability to step into positions much easier, increasing trading volume for a given stock. That’s largely due to the fact that options contracts are bundled as 100 shares apiece, meaning at current prices, options traders looking to trade one contract would need to put more than $320,000 on the line for a single trade. That price will drop to roughly $6,500 after the market closes today. The question many investors should have right now is how much enthusiasm has already been baked into CMG stock, and whether we may actually see a decline after the split. We’ll see, but clearly momentum is to the upside right now. On the date of publication, Chris MacDonald 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. Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.Consumer Discretionary, Retail, Restaurant