2022 is shaping up to be a busy year for stock splits.
Stock splits occur when a company divides up its shares to lower the price and increase the overall number of shares available. Companies typically split their stock when the share price has gotten very high.
While stock splits are cosmetic events that shouldn’t impact a company’s market value since nothing fundamental to the business is changed, there is plenty of anecdotal evidence that suggests they create wealth.
Take Nvidia (NVDA) for instance. The chipmaker said in May 2021 that it was splitting its stock 4-for-1. Shares rallied 20% between the May 21 announcement and July 19, the date the actual split occurred.
There are several theories that attempt to explain why share prices often rise following a stock split.
- The first is that splitting a high-priced stock makes it more affordable to retail investors, which in turn creates new demand that fuels price gains.
- Another is that stock splits send a signal to the market that a company’s share price has been rising. New investors may jump in because they assume this growth will continue.
- A third hypothesis is that managers declare stock splits to convey favorable information about the company’s unrealized value and growth prospects. Investors respond to this signal from insiders by stepping up share purchases.
Whatever the reason, there are plenty of examples of companies experiencing share price gains after a stock split.
Today, we look at 10 companies that have announced or already undergone stock splits in 2022. Not every name featured here is a recommendation, but this list of firms that are splitting their shares might be a good jumping-off point for interested investors.
Data is as of May 11. Stock split stocks are listed in alphabetical order.
- Market value: $716.4 million
- Stock split: 3-for-1
Kicking off our list of stock split stocks is ACM Research (ACMR, $11.63), which develops and manufactures semiconductor processing equipment for wafer-level production applications. The company primarily supplies single-wafer cleaning equipment and considers its cleaning tools best-in-class, offering higher yields and greater efficiency than competitor equipment. ACMR’s technology is protected by more than 350 issued patents.
The company ramped production of new products in 2021 and is on track to double its addressable market opportunity by adding two new product categories. ACM Research’s revenues rose 66% year-over-year in 2021 and earnings per share (EPS) grew 73%.
However, in April, the company warned that March quarter results were likely to fall short of …….