Chipotle Stock Price Plunged Before Split: Why?

The board of Chipotle Mexican Grill authorized a 50-for-1 stock split in March, which was the largest stock split in the history of the New York Stock Exchange (NYSE), per the Associated Press. Experts at the time claimed that the split will make the stock among the market’s most lucrative.

This belief was strengthened by shares of the massive fast-food chain increasing by 14%, offering prospective investors a window of opportunity to purchase, since the company announced the split.

“This is the first stock split in Chipotle’s 30-year history, and we believe this will make our stock more accessible to employees as well as a broader range of investors,” CFO Jack Hartung said in a press release at the time.

The profitability of the Chipotle stock may also have had something to do with a major institutional investment.

Just before the announcement of the stock split, in March, Public Sector Pension Investment Board, a prominent institutional investor, boosted its ownership of Chipotle Mexican Grill by 11.8%. In its third-quarter report, Holdings Channel provided information on this new project. The investment board presently has 2,955 shares of the restaurant giant’s stock, which was recently valued at approximately $5,413,000, according to the company’s SEC filing from that time.

However, a recent Barron’s report suggested the Chipotle stock plunged significantly prior to this historic split, which will officially occur on Wednesday, June 26. It stated that the stock fell 6% on Thursday, June 20.

While the reasoning for the plunge wasn’t immediately clear, the outlet suggested that following the stock’s amazing climb, some institutional investors holding sizable stakes are taking profits.

The top hedge fund shareholder in Chipotle, Bill Ackman’s Pershing Square Capital Management, reduced its holdings by about 10% in the first quarter. As to the latest 13-F filing of the business with the Securities and Exchange Commission, the restaurant chain continues to be the most valuable asset of Pershing Square, accounting for 20% of its portfolio.

Despite the rally, Chipotle has also been under fire from consumers due to its alleged decreasing portion sizes.

Social media users have expressed dissatisfaction with the restaurants’ portions and rising costs. The business claims that its portion sizes remain unchanged.