| How does Chipotle’s 50-to-1 stock split impact its stockholders’ equity?Accounting in the Headlines

Chipotle Mexican Grill announced a 50-to-1 stock split in June of 2024. This was the first time that Chipotle split its stock since going public in 2006. It was also one of the biggest stock splits ever among S&P 500 firms. On the day of the stock split, each share of Chipotle (NYSE: CMG) stock was selling for nearly $3,280.

The stock split occurred at the close of business on June 25, 2024, and began trading post-stock split on June 26, 2024.

View a quick tutorial video about stock splits at this link and then answer the following questions.

Discussion questions

1. Assuming the stock price immediately before the stock split was $3,280 per share. What will be the price of one share of Chipotle’s stock after the stock split?
2. An investor owns 40 shares of Chipotle’s stock before the split. After the split, how many shares of Chipotle’s stock will the investor own?
3. How will Chipotle’s total stockholders’ equity change as a direct result of this stock split?
4. What are some possible reasons that Chipotle might have for splitting its stock?