Key Points
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In addition to artificial intelligence (AI) hype, stock-split euphoria has helped lift the broader market.
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Several high-profile stock splits have been completed this year — but the latest announcement is the most anticipated of them all.
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For its first-ever stock split, this industry leader will issue a new class of shares.
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Although artificial intelligence (AI) has been the hottest thing since sliced bread, it’s not the only trend responsible for lifting the stock market to new heights. Investors gravitating toward Wall Street’s premier stock-split stocks have also played a key role in the market’s outperformance.
Several high-profile stock splits have been announced this year, including cybersecurity titan CrowdStrike Holdings (NASDAQ:CRWD) and beverage behemoth Monster Beverage (NASDAQ:MNST). But last week, Wall Street’s most anticipated blockbuster stock split was announced by social media maven Meta Platforms (NASDAQ:META) — and it’s anything but conventional.
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Stock-split stocks are all the rage on Wall Street
A stock split is an event that allows a public company to adjust its share price and outstanding share count by the same factor, without affecting its market cap or underlying operating performance.
Though stock splits come in two varieties, investors favor one far more than the other. Reverse stock splits, which are designed to increase a company’s share price, are typically shunned. This type of split is commonly undertaken by struggling companies trying to avoid delisting from a major stock exchange.
By comparison, investors often flock to companies announcing forward stock splits. This type of split reduces a public company’s share price (and increases its outstanding share count by the same factor) to make it more nominally affordable for retail investors who can’t buy fractional shares through their broker.
To date, every member of the “Magnificent Seven” has completed at least one forward split, except for Mark Zuckerberg’s Meta Platforms. In early 2027, that’ll change.
Image source: Getty Images.
In Meta’s third-quarter earnings release, the company announced the creation of a new class of non-voting common stock (Class C), with an effective date of Jan. 19, 2027. Holders of the company’s Class A shares will receive a one-for-one stock dividend for Class C shares sometime after this effective date in January. In other words, establishing this new share class acts as an unconventional 2-for-1 stock split.
The bigger story is that this stock split was long overdue, as Meta shares have rallied roughly 1,600% since its May 2012 initial public offering (IPO). Gains of this magnitude don’t happen by accident. They reflect the company’s prime position as a social media and AI leader.
In September, Meta’s family of apps, including Facebook, Instagram, WhatsApp, and Threads, drew an average of 3.64 billion people per day to its platforms. Given that no other social media platform comes close to this figure, Meta tends to enjoy exceptional ad-pricing power. Not surprisingly, the average price per ad jumped 14% in the September-ended quarter.
But it’s Meta Platforms’ AI ambitions that have provided the pep in its step of late. Zuckerberg’s company is already integrating generative AI solutions into its ad platforms, allowing businesses to create unique static and video messages for users, and boosting its ad-pricing power.
Furthermore, similar to neocloud companies, Meta intends to sell its excess AI computing power. Though Meta’s AI capital expenditures are jaw-dropping, its plan to recapture some of these costs by selling excess AI compute represents another high-margin, fast-growing initiative.
This’ll likely be the first of many stock splits for Meta Platforms.
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Sean Williams has positions in Meta Platforms. The Motley Fool has positions in and recommends CrowdStrike, Meta Platforms, and Monster Beverage. The Motley Fool has a disclosure policy.
