One of the stocks that has shown strong performance in recent years is ServiceNow ( NOW 1.88% ) The company made its initial public offering debut. IPO Purchased at $18 per share in 2012, the stock has risen consistently and is currently trading at over $800 per share.
Because of its low price, investors are more and more viewing ServiceNow as a potential investment. stock-split applicant. However, what are the chances of the company actually taking that step? Let’s examine this more closely.
The status of ServiceNow’s stock.
ServiceNow is a company that provides enterprise software solutions for automating workflows in online businesses. It includes features for collaboration and development, incorporating technologies like artificial intelligence, machine learning, and robotics process automation to enhance operational efficiency.
Businesses like Salesforce , Atlassian , Broadcom , and many other companies are involved in this industry. While Atlassian has not conducted a stock split, Salesforce carried out a split in 2013. Additionally, Broadcom recently had its first stock split in history, with a 10-for-1 split in July.
ServiceNow has never divided its shares or suggested that it will do so in the future. If the company were to conduct a 10-for-1 split like Broadcom did, each share priced at around $800 would be exchanged for 10 shares valued at $80 each. This action would not change the total value of the investment for each shareholder.
On the other hand, Broadcom, which went public three years earlier than ServiceNow, decided to wait until its pre-split price exceeded $1,000 per share before initiating the IPO.
Some people do not believe that stock splits are essential. For instance, Warren Buffett has never chosen to split his stocks. Berkshire Hathaway is the name of a multinational conglomerate holding company founded by Warren Buffett. Even though the share price for A shares is over $600,000, he chose to issue B shares to provide a more accessible investment option for smaller investors. Therefore, shareholders of ServiceNow should not view this decision as a necessary step for the company.
Reasons why a division might happen in the future
However, ServiceNow’s expansion is expected to persist, potentially leading to a rise in the demand for the company to divide its shares.
In the first six months of 2024, revenue increased by 23% to reach $5.2 billion when compared to the corresponding period in the prior year. Additionally, revenue had seen a 24% growth in 2023, indicating that the increase is not an isolated occurrence. Despite a temporary boost from a tax rebate, the growth trend has been consistent. net income Profits are expected to increase in the long run, with a slight decrease in 2023 and 2024.
Additionally, as the company’s income and profits increase gradually, the stock price also goes up. liquidity The decrease in trading volume, which refers to the buying and selling of shares, is expected. As a result, the company might choose to divide its stock to keep liquidity stable and simplify the process for investors to own complete shares of the company. This move could have a slightly positive impact on the stock.
Moreover, in the event that an investor makes a written communication covered call Currently, shareholders of ServiceNow must possess 100 shares, which would amount to $80,000. In the event of a 10-for-1 split by ServiceNow, this expense decreases to $8,000, potentially boosting covered call trading. These circumstances might also lead the ServiceNow board to consider authorizing a split in the future.
ServiceNow and a division of shares
ServiceNow has not made any official statements about dividing its shares, so investors should not anticipate it becoming the next prominent technology company to do so. However, investors should also not dismiss the possibility of this happening in the future.
The company’s stock price has surpassed $800 per share as a result of its consistent growth over the years in the enterprise software sector. With ServiceNow displaying no indications of slowing down its growth, it is likely that the stock price will keep rising, leading to potential consideration of splitting the shares.
While it is true that not every CEO is in favor of stock splits, ServiceNow has not explicitly dismissed the possibility. In addition, dividing stocks can make them more accessible to small investors and boost trading activity, ensuring better liquidity. These reasons suggest that even if ServiceNow does not split its shares soon, it is probable that it will happen at some point in the future.
