Navitas Semiconductor (NVTS +1.16%) is a small-cap company that designs gallium nitride (GaN) and silicon carbide (SiC) chips. It had a slow start to 2025, but its share price skyrocketed after the company and Nvidia announced a partnership agreement in May. Navitas is developing technology to support Nvidia's artificial intelligence (AI) data center systems.
Since then, its stock has risen by 218% (as of Sept. 11). This kind of increase sometimes means a stock split is on the horizon. Let's explore why companies split their stocks to see if Navitas might do the same.
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How stock splits work
A stock split is a way for a company to either increase or decrease its outstanding shares. With a forward split, a company effectively divides its shares. In a 10-for-1 forward split, for example, each share would be split into 10 new shares. If you owned 100 shares before the split, you would own 1,000 shares after.
The value of the company and shareholder positions don't change during a split. If a company is trading at a share price of $1,000, and it carries out a 10-for-1 stock split, then the new share price would be $100.
The other type of split, a reverse stock split, consolidates shares. For example, a 1-for-10 reverse split means 10 shares would turn into one. If the company was trading at $10, the share price would increase tenfold to $100.
Is Navitas Semiconductor a candidate for a split?
Normally, the biggest factor in a stock split is the company's share price. Navitas is trading at about $6 at the time of this writing.
NASDAQ: NVTS
Key Data Points
Forward splits are most common when a company's share price has been going up and is expensive enough to potentially deter investors. If a company trades at $1,000 to $2,000, some investors will rule it out just because of the cost of buying a share. A forward split brings the price down, which can attract new buyers.
There's almost zero chance Navitas carries out a forward split in the foreseeable future. A $6 share price is well within most investors' budgets.
Companies often carry out reverse stock splits when a low share price puts them in danger of being delisted. Stock exchanges have listing requirements, including a minimum share price. The Nasdaq stock exchange, where Navitas trades, requires companies to maintain a minimum share price of $1.
Navitas was in that danger zone earlier this year, when it was trading at under $2, until the Nvidia news pushed up its price. A reverse stock split is more likely than a forward split for Navitas, but only if its price crashes.
Should you invest in Navitas?
Navitas has a wide range of addressable markets because of the speed and efficiency of its GaN and SiC chips, which can be used in data centers, electric vehicles (EVs), mobile chargers, energy storage, and solar solutions. The partnership with Nvidia should be a big revenue driver.
However, Navitas is losing money and will likely continue to do so for at least a few more years. Revenue over the trailing 12 months is $68 million, while earnings before interest, taxes, depreciation, and amortization is a negative $90 million. The company also announced with its second-quarter earnings this year that it sold 20 million shares to raise $100 million in capital.
While stock splits don't change the value of a company's shares, issuing new shares does. It dilutes the value of each investor's shares.
Navitas is a high-risk, high-reward company. With a $1.2 billion market cap, it's worth checking out if you're looking for semiconductor stocks of companies that are still in their early stages and you have a high tolerance for risk. There probably won't be a stock split anytime soon, but at the current price, you could already buy quite a few shares for under $1,000.
