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Will This E-Commerce Provider Be the Next to Split Its Stock?

By Danny Vena - Dec 30, 2020 at 11:00AM

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A couple of high-profile companies split their stock in 2020. Will this online retailer be next?

After largely falling out of fashion over the past several years, the spotlight is once again on stock splits. This is largely the result of two prominent companies, Apple ( AAPL -1.17% ) and Tesla ( TSLA -6.42% ), that both split their shares earlier this year. While it's largely a nonevent from a financial perspective, investors are beginning to wonder if the move makes sense for companies that have seen a large run up in their stock price, making shares more accessible to smaller investors.

On this episode of Fool Live that aired on Nov. 23, Motley Fool co-founder David Gardner and contributor Danny Vena were joined by Federico Sandler, MercadoLibre's ( MELI -6.75% ) head of investor relations, who addressed this very question.

David Gardner: I wanted to ask you, we're going to start looking at the Slido questions, and threading those into some of the other great questions Danny will be asking. The most popular question. Now, this would not have been a question that I care very much about, but this is the one with the most thumbs-up, so I have to ask them on behalf of our viewer base, "Is [MercadoLibre] ever going to consider a stock split?"

Federico Sandler: A stock split. Look, I think it's something that we could potentially evaluate. I think right now, the management's focus is more on the key things that we need to get to our objectives, which is to win e-commerce and to become the fintech leader. We do appreciate the incremental liquidity and benefits of doing a stock split. But right now I think we have other things in our plate that we need to focus on. I would say we could do it, but I don't think it's in the short-term. Something that we're looking to do.

David Gardner: Understood. It's funny because here in the U.S. I would say many of the last five or six years there are very few stock splits. But then in 2020, Apple, Tesla, other big well-known companies, all of a sudden start splitting their stock again. Some people have that on their minds, were the first to say it makes no material change in business, we would want every management team focused on creating value. The joke is, is the pizza better if it's in eight slices instead of just four slices? It's the same pizza, but that is the most popular question. I had to ask it, Danny.

Federico Sandler: Let me overlay one more thing before we move because I think when we think about what is the biggest risk to our business, we don't have a strategy problem. We pretty much know what we need to do, but we're moving very fast in multiple verticals, in multiple countries. Execution is a biggest factor in our success of our business. So that's why we could do it, but I think right now we're doing so many things that, like you said, we're very much focused in building value to our shareholders. Then we can evaluate split, but not now.

Danny Vena: Personally as an investor, I would rather see management focused on growing the business than whether or not they're going to do a stock split.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Mercadolibre, Inc. Stock Quote
Mercadolibre, Inc.
$1,052.95 (-6.75%) $-76.27
Apple Inc. Stock Quote
Apple Inc.
$161.84 (-1.17%) $-1.92
Tesla, Inc. Stock Quote
Tesla, Inc.
$1,014.97 (-6.42%) $-69.63

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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