Insiders & Bill Ackman Quietly Offload $319M in ONE Company Ahead of Record Stock Split

Chipotle is about to make a major move with its first-ever 50-for-1 stock split, scheduled for this Wednesday. This isn't just a typical stock split; it’s set to be one of the largest in NYSE history.

Chipotle's CEO, Brian Niccol, has been teasing this move since March, along with some other spicy tidbits—like their plan to unleash a guacamole-prepping robot named "Autocado."

(Source: Chipotle)

Yes, you read that right. A robot dedicated to perfecting your favorite green dip.

The stock split will transform Chipotle’s shares, which closed at $3,193.74 on Monday, into more affordable bite-sized pieces priced at $63.86 each. 

This move is seen as a way to broaden the investor base and give employees more flexibility with their shares. It’s like taking that giant, unmanageable burrito and turning it into 50 perfectly snackable tacos. 

Shareholders as of Tuesday’s close will receive these extra shares, which will start trading on Wednesday. Chipotle’s stock has been on fire, rising more than 44% year to date, and this split is designed to keep that momentum sizzling.

However, the excitement of the stock split comes with a side of skepticism. Billionaire investor Bill Ackman, a long-time supporter of Chipotle, has recently reduced his stake in the company, tossing a massive wet tortilla over the fiesta.

During the first quarter, Ackman sold nearly 10% of his shares, cutting Pershing Square’s holding to 743,984 shares (which is estimated to be worth around $277 million). Given that Chipotle’s stock has surged by 57% over the past year, Ackman’s decision to sell raises some eyebrows. It's like being the first to leave a party that's just getting started—what does he know that we don’t?

Moreover, insider selling at Chipotle has been significant. Over the past year, insiders have sold more than $42 million worth of shares. In the last three months alone, they dumped $33 million, with CEO Brian Niccol himself selling $20 million at prices around $3,195 per share.

(Source: PopCrush)

This level of insider selling suggests that those closest to the company might believe the stock is currently overvalued. When the cooks start leaving the kitchen, you’ve got to wonder if something’s burning.

Adding to the mystery, insider transactions over the past year show more sales than purchases. Insiders own only 0.7% of the company, equating to about $565 million. This low level of insider ownership can be a red flag since high ownership typically aligns insiders' interests with those of shareholders. 

So, when the folks who know the secret recipe start cashing out, it’s worth taking a second look.

Despite these sales, Chipotle continues to innovate and grow. They are expanding their menu with new items like al pastor chicken and increasing the number of drive-thru “Chipotlanes,” which have been crucial during the pandemic. It’s clear that Chipotle isn’t just resting on its achievements; they’re adding extra spice to keep things interesting. Last year, Chipotle saw a 7.9% increase in full-year comparable restaurant sales and is predicting mid to high-single digit growth for this year.

Chipotle’s commitment to quality and innovation remains strong. They still don’t use freezers in their restaurants, sticking to their promise of daily-prepped food using responsibly raised meats and locally sourced vegetables. This strategy has kept customers coming back, even with a 7% menu price hike and their recent portion size debate that went viral on TikTok.

(Source: Yahoo)

Plus, their foray into tech with Autocado shows they’re not afraid to blend tradition with modern efficiency.

As Chipotle prepares for its stock split, it’s essential to look beyond the headlines. The significant insider selling and Ackman’s reduction in shares indicate that there might be concerns about the stock’s valuation. While the stock split aims to make Chipotle more accessible, you should be aware of these red flags. Consider this a friendly reminder to check the ingredients list before you take a big bite.

Stock.News does not have positions in companies mentioned.