The stock market has seen plenty of stock splits in 2024. Driven higher chiefly by the artificial intelligence (AI) boom and slower inflation trends, several high-priced stocks have been sliced into a larger number of smaller shares.
Examples of big-name announcements so far include a 10-for-1 split of Nvidia (NASDAQ: NVDA) shares in early June, a 50-for-1 split in Chipotle Mexican Grill (NYSE: CMG) two weeks later, and Broadcom‘s (NASDAQ: AVGO) 10-for-1 split over this very weekend. This was Nvidia’s second split since 2006. In contrast, the other two industry titans had never resliced their shares before.
None of these stock splits added or burned any real value for shareholders. The splits merely rearranged the same total market value into a larger number of shares, reducing the price per share and making the stock more accessible.
Next in line: MicroStrategy
So who’s next in line for a stock split? As it turns out, the winning name is business intelligence specialist MicroStrategy (NASDAQ: MSTR). The board of directors decided on a 10-for-1 stock split earlier this week, to be executed after the closing bell on Thursday, Aug. 1.
The company hadn’t executed a split since a 1-for-10 reverse split to prop up a fading stock price in 2002. Founder and chairman Michael Saylor’s all-in bet on Bitcoin (CRYPTO: BTC) as an alternative to cash reserves has worked wonders so far. The stock is up more than 225% over the last 52 weeks and 1,060% in four years, driven by smaller gains in Bitcoin’s price per coin. These days, MicroStrategy stock is changing hands for the princely sum of $1,310 per share.
And MicroStrategy has evolved into a pretty direct bet on Bitcoin in recent years.
MicroStrategy’s recent financial maneuvers
MicroStrategy’s stock chart and financial activities in 2024 sent strong hints of a possible stock split.
For example, MicroStrategy recently completed an $800 million offering of 2.25% convertible senior notes due in 2032. The notes are convertible into cash, shares of MicroStrategy’s class A common stock, or a combination of both. Notably, the initial conversion price is approximately $2,043.32 per share, a 35% premium over the stock’s average price on June 13. This premium indicates strong investor confidence in MicroStrategy’s stock performance.
Additionally, the stock has been floating higher on Saylor’s Bitcoin strategy. At the end of March, the company held approximately 214,300 Bitcoins with a market value of $15.2 billion. The company has consistently added to its Bitcoin holdings, financed by cash flows from the software business, stock sales, and fresh debt papers.
Michael Saylor’s company raised over $1.5 billion in the first quarter alone through convertible debt offerings, using that cash to acquire 25,250 additional Bitcoins. MicroStrategy also raised $800 million in new debt on June 18, aiming to purchase some more Bitcoin with the proceeds.
Amid this bustling Bitcoin-buying action, the cryptocurrency’s price has increased more than 90% over the last year. Most market watchers (myself included) expect the Bitcoin gains to continue in the second half of 2024 and next year, powered by the predictable patterns of Bitcoin’s halving cycles and the recent addition of exchange-traded funds (ETFs) based on real-time Bitcoin prices. If that theory plays out as expected, MicroStrategy’s stock should also see even higher stock prices over the same period.
Why a stock split makes sense for MicroStrategy
Given MicroStrategy’s soaring stock price and Saylor’s daring financial strategies, the announced 10-for-1 stock split makes MicroStrategy shares more accessible to a broader range of investors. Currently trading just over $1,300 per share, the stock’s high price can be a barrier of entry for smaller investors — especially if they are unaware of or uncomfortable with buying fractional shares of high-priced stocks. Low-budget investors will find it easier to reach for a stock priced around $130 per share.
So MicroStrategy’s strategic financial maneuvers, strong Bitcoin holdings, and high stock price create an ideal environment for a stock split. Now that the split is coming soon, investors should still keep a close watch on this tech veteran and crypto maven. Only time will tell how the Bitcoin-centric strategy will work out in the long run, but it’s certainly off to a good start.
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Anders Bylund has positions in Bitcoin and Nvidia. The Motley Fool has positions in and recommends Bitcoin, Chipotle Mexican Grill, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Stock-Split Watch: MicroStrategy Is Next was originally published by The Motley Fool
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