Recent Stock Split Announcements from Major Companies
ServiceNow has revealed plans for a 5-for-1 stock split, pending approval from shareholders.
Meanwhile, Netflix is preparing for its own 10-for-1 split in November, marking its third such occurrence.
While stock splits don’t really change the fundamentals of a business or investor ownership, they tend to generate excitement among investors.
So far, the first part of 2025 has been relatively quiet regarding stock splits, but activity seems to be picking up with two significant announcements from tech companies during the third quarter earnings season.
Focusing first on ServiceNow, the company not only shared strong third-quarter results but also disclosed the 5-for-1 stock split. This enterprise software firm has greatly benefited from the AI boom, achieving a 22% year-on-year revenue growth. Management even raised their outlook, predicting that contract value for their AI business could nearly double by 2026.
The net income experienced a rise of around 16%, resulting in approximately $11.4 billion in remaining performance obligations, nearly equating to one year of revenue.
As noted earlier, the Board of Directors has backed the stock split, which is intended to make the currently high stock price of about $950 more accessible to individual investors. However, it will require shareholder approval during a special meeting set for December 5th.
In a similar vein, Netflix, which is among just ten companies in the S&P 500 expected to surpass $1,000 in stock price, will also be undergoing a split. It’s interesting to note that, unlike ServiceNow, Netflix made its split announcement a week after releasing its third-quarter earnings.
On that note, Netflix didn’t meet profit expectations, leading to a decrease in stock prices. While their sales met projections, profits took a hit due to unexpected foreign tax charges. They did lower their operating profit forecast, although they claimed ad revenue will double this year without providing specific figures.
Importantly, Netflix’s split is not contingent upon shareholder approval. Those owning shares as of November 10th will receive an additional nine shares for every share they currently hold, with the new shares expected in accounts by November 14th, and trading at split-adjusted prices starting on November 17th.
Netflix is implementing this split to enhance stock accessibility, particularly for employees in its stock option program. This will mark the third time Netflix has split its stock, following splits in 2004 and 2015.
It’s essential to recognize that stock splits don’t fundamentally reshape your investments. If you held shares in ServiceNow or Netflix prior to the splits, you’ll still own those companies, just with more shares representing a smaller percentage.
If you don’t already own shares, it might be easier to buy into it, especially if your brokerage doesn’t offer fractional shares.
In summary, stock splits typically occur when a company is performing well and its stock price has risen significantly. However, it’s vital for investors to comprehend that this process doesn’t alter the business fundamentals or ownership stake.
For those considering investments in ServiceNow, one might want to explore other options suggested by analysts; oddly enough, ServiceNow isn’t currently listed among the top picks.
