Nvidia To Embark On A 4-to-1 Stock Split

Pioneers of GPU-computing, Nvidia Corporation, announced on Friday that it plans to embark on a 4-for-1 stock split, the biggest in its history. This will give investors three extra shares for every one share they already own. It is important to note, however, that a stock split doesn't change the value of the stock already owned. For example, if an investor owns one share of Nvidia (NASDAQ: NVDA)

worth $600, after the split, they're going to own 4 shares worth $150.

This will be the fifth time Nvidia has split its shares, with the first being a 2-to-1 split which occurred in June 2000, seven years after the company was founded. Two more 2-to-1 splits took place in the next year; September 2001, and 2006. The last was a 3-to-2 split in 2007.

Companies embark on stock splits to boost the stock's liquidity and attract new investors. When the price of shares rises significantly, companies tend to split the stock to bring the price to a more popular trading price. It is generally assumed that investors will feel more comfortable purchasing 50 shares of a $100 stock as opposed to 10 shares of $500 stock, even if the value of both stocks are the same. Lowering the price also makes the stock more accessible to newer investors and employees who may not be able to afford the $600 price tag.

Nvidia shareholders will vote on the proposed split at the company’s annual meeting on June 3. If approved, each Nvidia holder of record on June 21 will receive a dividend of three additional shares of common stock for every share held.

Founded in April 1993, Nvidia mainly designs graphic-processing units (GPUs) for the gaming and professional markets. In the past five years, the company has seen rapid growth with the stock gaining about 1,260% as the company has established itself as an essential company in the artificial intelligence sector. Its GPUs have been found to facilitate machine learning, beyond their ability to juice the appearance and playability of videogames.

According to the company's last financial report released in January 2021, Nvidia recorded sales worth $16.68 billion - a jump of about $5 billion from the figure reported in 2020.

With the stock split, it is expected for the company to report even higher annual sales in 2022. With analysts expecting about $22.42 billion.

If shareholders approve of the stock split, trading on a split-adjusted basis would then begin on July 20 after all shareholders have received their added shares on the 19th of July.

After the split was announced, Nvidia shares gained more than 3% in Friday’s trading session to trade at $608.22.