NVIDIA’s Stock Split & DuPont Business Split - What It Means For Investors

On Wednesday, two leading American companies, NVIDIA Corp, a technology pioneer that makes GPUs important for AI (artificial intelligence), and DuPont de Nemours Inc, a leader in innovation with technology-driven materials and solutions globally., announced corporate actions that will result in a share price change for NVIDIA and more companies being listed by DuPont on the US market.

Stock Split 

Starting with NVIDIA Corp, a share that has consistently been among EasyEquities' top 5 buys in the US market, released its results on Wednesday. It revealed that it would increase its dividend by 150% after consistently paying the same cash payment since mid-2021. The chip giant also indicated that it would undergo a stock split whereby investors would receive 9 additional shares for every one share they own; the stock split is expected to commence before the upcoming dividend payout.

What’s worth noting is that its shares reached a high of $1,000 after hours on Wednesday. If it maintains this level, the shares could trade at around $100 after the stock split.

NVIDIA's CEO says, "The next industrial revolution has begun - companies and countries are partnering with NVIDIA to shift the trillion-dollar traditional data centers to accelerated computing and build a new type of data center - AI factories -  to produce a new commodity... We are poised for our next wave of growth. The Blackwell platform is in full production and forms the foundation for trillion-parameter-scale generative AI."

Previously, Tesla Inc (a leading company in the electric vehicle sector) also announced a stock split when it was trading at around $800. The company indicated that it believed the stock split would reset its stock price, giving employees more flexibility and potentially increasing stockholder value. It would also make its stock more accessible to interested retail investors.

Business Separation  

DuPont, a leading firm involved in global technology-based materials and solutions for the semiconductor, circuit board, healthcare, aerospace, industrial, and transportation industries, announced that it plans to separate into three publicly listed companies—focusing on electronics and water companies. New DuPont will remain a diversified industrial company after the separation.

“This is an extraordinary opportunity to deliver long-term, sustainable shareholder value through the creation of three strong, industry-leading companies. The three-way separation will unlock incremental value for shareholders and customers and also create new opportunities for employees,” said DuPont's Executive Chairman and CEO. Subject to customary conditions and regulatory approvals, this separation is expected to be completed within 18 to 24 months.​

Last year, Kellogg’s separated into two entities, with the parent company renamed to Kellanova (snacking business) and its cereal division becoming WK Kellogg Co. Kellogg Company's CEO commented, "After more than a year of comprehensive planning and execution, we are more confident than ever that the separation will produce two stronger companies and create substantial value for shareholders.”

Kellanova, WK Kellogg Co, and all the above-mentioned companies are available on EasyEquities, where investors can invest any amount.

Conclusion

Stock splits don't affect a company's total value or an investor's portfolio value; they just create more shares at lower prices. On the other hand, when companies separate into two or more businesses, it could create more focused and specialised firms, potentially unlocking greater value for investors. A separation could also include distributing shares of the newly formed company(s) to existing shareholders at a defined ratio.

On the downside, separation also introduces new risks and requires investors to reassess the potential of each new entity. In the case of a reverse stock split, a stock could drop in value if the company does not meet market expectations, potentially leading to a reverse stock split caused by the share price significantly dropping over time.

In general, the main goal of companies is to create long-term value for their shareholders. It is important to consider how the individual companies perform after a separation and to closely monitor their earnings reports and outlook following a stock split.