Chipotle's 50-for-1 stock split: How retail investors feel

Chipotle (CMG) executed a 50-for-1 stock split on Wednesday morning, increasing the number of shares but keeping the total dollar value of shares the same.

Yahoo Finance Reporter Brooke DiPalma joins Wealth! to explain how the stock split works and share her findings from her trip onto the streets to ask New Yorkers how they feel about the company.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Nicholas Jacobino

Video transcript

I go to Chipotle order.

It is a brown rice burrito bowl to go with black beans.

I add guac and some medium salsa and romaine lettuce, no cheese, no sour cream.

It's always a burrito bowl.

Tend to skip the guac.

Don't like to pay for extra guac rice beans.

A little bit of meat like a bowl.

But I, they don't have nachos option.

I basically kind of make it into nachos.

I like the tacos, white rice, uh beef, get the lettuce tomatoes, hurricane finch off.

Shake it up some unhinged orders.

You just heard from a number of folks out on the streets of New York City, they all sounded pretty good and they were all talking Chipotle like Yahoo Finance's Brooke.

Dipalma went out there yesterday to talk to people about Chipotle's 50 for one stock split just went into effect at the market open today.

We should note Brooke tell us a little bit about the stock split.

And when you asked these patrons of Chipotle, clearly, these patriots, these customers very loyal customers.

As you noted, Burrito Chain, Chipotle conducted a stock split.

Now that means if you own shares as a market close on June 18th, you receive, as you can see here 49 additional shares for each one house.

And when the market opened today, those shares which were worth over $3200 as of third Tuesday's close are now trading around 64 bucks a share.

Now a reminder, a stock split does not affect a company's value.

It simply creates more shares, reducing the cost of each individual share.

Generally, stock splits are used to make shares more affordable for investors.

And yesterday, as you saw, I went out into the streets of New York City to ask people what they thought of Chipotle and whether they consider investing.

Now, we didn't run into any current shareholders, but I essentially asked people what they knew about stock splits.

And if they consider investing now that the price of each individual share has gone from upwards of three grand to just around $65.

Here's what they had to say.

I think stock splits make it more available for retail traders to be able to afford it, but it just really depends on the health of the company.

But now since they're affordable, I might as well.

So I'll definitely buy maybe a few and just hold on on that and hope that it goes up again and then I can make something from it.

Um I'll have to look more into it.

Is it going to go back?

That's the question, right?

Like you're diluting it.

So you've got a whole load of new shares that doesn't necessarily mean that the business is worth more.

I probably wait till they have another e coli scare and then I'll buy in then again, why not?

I mean, a lot of people are going there so it might be a good deal.

Definitely.

I'm gonna go buy some Chipotle stock.

Open up the Robin Hood butt.

Let's go.

Why not make more money?

Right.

Probably not because I'm a Bogle head.

So I just prefer a very broad diversified type of portfolio.

So I don't typically go out and just buy individual stocks.

I think Chipotle is one of those companies.

It's gone through a lot and I think it comes back so much stronger every time it goes on A L it's worth it long term.

So most people said they'd consider it.

Chipotle is one of the top trending takers on Yahoo finance and I definitely wanna make note of that.

Lots of excitement around the stock split.

All right, waiting for hazardous events is not an investment strategy, but that guy also waiting for the E coli is, is clearly um he, he's got some type of portfolio strategy.

Anyway, some of the people in your video, they were wondering if the stock price was going to keep going up, how the stocks tend to perform after some of these stocks splits historically.

Yes.

Historically, what we've seen is that stocks are typically bullish for companies and when they do happen, they do see a good average return.

And according to Bank of America, average returns one year later, following stock splits are about 25%.

And that's compared to an average return of roughly 12% for the broader market.

I do want to point out one stock that I closely as well.

Wal Mart, they conducted a stock split back in February and what we've seen in the last three months is that stock rise roughly 12%.

And so there is lots of excitement following a stock split and as we noted earlier and also does allow more investors to jump in at a lower price.

Brooke.

All right out there in the streets.

Get it, getting it all, getting all the takes from all the New York City folks.

Indeed.

And some investors out there, Yahoo finance his own Brook Depalma Brooke.

Thanks so much.