Splits and distributions

A corporate action is something the company does to its own shares. Splits, dividends, spin-offs and rights issues all qualify, and they divide into two groups: the ones that change what each share owns, and the ones that only change how many shares there are.

A split is firmly in the second group, and there is a real filing that shows it.

What the filing actually says

Walmart filed a Form 8-K under Item 5.03, amendments to articles of incorporation, on 23 February 2024. Four facts from it, in the company's own words and figures.

The board authorised a 3-for-1 forward split on 30 January 2024. The certificate of amendment was filed after the close of trading on 23 February 2024. Each holder of record at the close of business on 22 February 2024 received two additional shares. Trading on a split-adjusted basis was expected to begin on 26 February 2024.

And the arithmetic, also from the filing: 2,684,264,089 (Walmart Inc. Form 8-K, 23 February 2024, accession 0000104169-24-000033) shares outstanding on 22 February became approximately 8,052,792,267 (Walmart Inc. Form 8-K, 23 February 2024, accession 0000104169-24-000033) after the split. That is exactly three times the first number.

The par value stayed at $0.10 a share and the authorised share count was increased proportionately, from 11,000,000,000 to 33,000,000,000.

What changed for a holder, and what did not

Note what the dates imply. The shares were distributed on 23 February and the market began quoting the adjusted price on 26 February, the next trading day. For a distribution this large the quoted price is not adjusted on the record date; it is adjusted after the new shares have been delivered.

What a split does to the data you are looking at

Every per-share figure in the company's history has to be restated: earnings per share, dividends per share, book value per share, and every price on every chart. A filed statement after the split shows prior years already restated.

This is where errors get made. A ten-year earnings per share series that splices pre-split figures onto post-split ones produces a collapse in earnings that never happened. The same applies to a dividend-per-share history, and a dividend-growth streak computed across an unadjusted split is simply wrong.

Two smaller points follow. A split does not change the cost basis of a holding in total, only per share, so tax records need restating too. And a reverse split works the same way in the other direction: fewer shares, each owning more, with the same total claim.

Why a company bothers

Since a split changes nothing about the business, the reasons given for one are always about the shares rather than the company. The usual reason offered is that a lower price per share makes round lots easier to buy, which mattered more before brokers offered fractional shares.

Whatever the reason, the accounting consequence is the same and it is nil. Revenue, profit, assets, liabilities and cash flow are untouched. Only the denominator of every per-share figure moves.

That is the sentence worth keeping. A corporate action that changes the denominator is bookkeeping. A corporate action that changes the numerator, such as a buyback funded with real cash or a spin-off that hands away a division, is a decision about the business, and those belong in a different course.

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