Is Netflix Inc. (NFLX) Splitting in the Near Future?

As Netflix Inc. (NFLX) continues to soar, reaching new all-time highs, investors can't help but wonder if the streaming giant is planning a stock split in the near future. With a current share price nearing $1,000, Netflix is no stranger to stock splits, having done so twice before in its history. But what makes a stock split likely, and how might it affect Netflix's stock price and employee compensation?



Historically, Netflix has split its stock when the price has reached a certain threshold. In 2004, Netflix performed a 2-for-1 stock split when its shares reached $72. Then, in 2015, Netflix executed a 7-for-1 split as its stock price approached $700. With Netflix's current share price nearing $1,000, it's not unreasonable to expect another stock split in the near future.



One reason Netflix might consider a stock split is to make its shares more affordable to individual investors. As the stock price increases, it can become less accessible to smaller investors, who may struggle to purchase even a single share. A stock split can help address this issue by lowering the share price, making it more attractive to a broader range of investors.

Another reason for a potential stock split is Netflix's stock-based compensation (SBC) strategy. As Netflix's stock price has risen, the cost of SBC has also increased. In 2023, Netflix issued $339 million in SBC to employees, which is a substantial expense for the company. A stock split could help mitigate this cost by reducing the number of shares required to provide the same value in compensation. For example, if Netflix were to perform a 4-for-1 stock split, the number of shares issued for SBC would quadruple, but the overall value would remain the same, making it more affordable for the company to compensate employees.

However, a stock split could also have an impact on the value of existing employee stock options. If Netflix were to announce a stock split, the value of outstanding stock options would be adjusted accordingly. For example, if Netflix were to perform a 4-for-1 stock split, the number of shares underlying each option would quadruple, but the exercise price would remain the same. This could potentially dilute the value of existing options, as the number of shares required to exercise the option would increase, but the overall value of the option would remain the same.

In conclusion, Netflix's history of stock splits and its current share price suggest that another stock split could be on the horizon. While a stock split could help make Netflix's shares more affordable to individual investors and mitigate the cost of SBC, it could also have an impact on the value of existing employee stock options. Ultimately, the decision to split the stock would depend on a variety of factors, including the company's financial performance, market conditions, and the preferences of management and shareholders. As Netflix continues to soar, investors will be watching closely to see if a stock split is in the cards for the streaming giant.