Shopify Stock Announces 10-for-1 Stock Split

Shopify (TSX:SHOP)(NYSE:SHOP) stock joins other tech stocks by announcing a potential stock split for June 2022 and “founder shares.”

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. Amy’s work can be found regularly on the Financial Post and MoneyWise Canada. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog Finley, and travel. Follow Amy on LinkedIn.

Published April 11, 2022 10:03 am EDT

| More on: SHOPSHOP

Shopify (TSX:SHOP)(NYSE:SHOP) joined the latest trend of large tech companies when it announced a potential 10-for-1 stock split in the coming months.

What happened?

Shopify stock announced on Monday it would seek approval to split its shares. Shareholders of record as of June 22, 2022, will receive nine more shares on June 28, 2022. The e-commerce company saw shares rise to all-time highs of $2,228 last year, only to lose more than half of its value in the beginning of 2022.

This led to other tech companies in a similar position to announce a stock split. Companies such as Amazon and Alphabet also announced stock splits earlier this year. The reason is simple. With shares so high, they’re out of reach for many investors. By making shares more affordable, Shopify stock should be able to increase its market value once more.

So what?

It wasn’t the only announcement that came with the stock split, however. Another announcement that needs approval is for a new class of “founder shares” for founder and CEO Tobi Lütke.

These shares would give Lütke 40% of total voting power attached to Shopify stock shares. However, it is not transferrable and only applies to Lütke for as long as he is working either as an executive or on the board of directors.

Now what?

Shares of Shopify stock were up 2% in pre-market trading after falling 13% last week. While the stock isn’t trading at 52-week lows, it remains on the low end compared to the four-digit share price it enjoyed earlier this year.

The big question is whether or not to buy Shopify stock before or after it splits. If you look at Amazon and Alphabet, these companies saw shares rise after the announcement. Why? A split is a sign that the company is doing well in general. And that remains true for Shopify. It’s merely that shares have become so high as to be quite volatile for current and potential investors. A stock split removes that volatility and allows investors to join in and remain confident about their current investment.

With shares still so low, it might be a good time to consider upping your stake in Shopify stock to retain as many shares as you can when the stock splits in June.