The Trade Desk, a data-driven advertising firm, has seen unusual trading activity this week. The company completed its first-ever stock split and started trading according to the split on June 17. How did the stock split impact The Trade Desk stock?
The Trade Desk is designed to provide data-driven advertising to help users launch more successful ad campaigns and grow their audience. The company caters to advertising agencies, with an open platform that agencies can customize to their needs. It has been a publicly traded company on the Nasdaq Exchange since 2016 and trades under the ticker symbol "TTD."
The Trade Desk stock split
The Trade Desk was founded in 2009 based on the founders’ view that advertising wasn't effective at the time. Its headquarters is in California, while it has offices throughout the U.S., Europe, and Asia.
They sought to build “an independent media-buying platform focused solely on the buy side.” The Trade Desk has just undergone a stock split. What exactly is a stock split and how can it impact share prices?
In a stock split, the total number of outstanding shares for a company increases. A common stock split is a 2-for-1 split, in which every share becomes two shares. A company with 1 million shares would have 2 million shares outstanding following a 2-for-1 split.
The Trade Desk implemented a 10-for-1 stock split, which means that every share pre-split now equals 10 shares of TTD. A stock split doesn’t change the inherent value of the company itself, but it does impact the share price.
Often, companies split stock in order to lower the price per share and make it more appealing to a larger pool of investors. Some firms refuse to split stocks no matter how much the share price soars, which is why Berkshire Hathaway stock is so high.
Sometimes companies will implement a reverse stock split, in which a company divides the number of shares stockholders own, instead of multiplying them.
Impacts of the TTD 10-for-1 split
As The Motley Fool noted, TTD has enjoyed a period of massive growth leading up to its stock split. The past four years brought a fourfold increase in revenue, with net income increasing twelvefold.
The revenue for TTD increased YoY by 26 percent in 2020, despite many advertising firms choosing to pull back on their ad budgets or even pause campaigns due to COVID-19 uncertainties.
Despite the share price increase following the stock split, share prices, when adjusting for the split, are below TTD’s all-time high. A split-adjusted all-time high would be $97.28 per share, according to The Motley Fool.
In a May press release announcing The Trade Desk’s stock split, CEO Jeff Green said that the company’s share prices had risen by 2,100 percent since its 2016 IPO. He said, “We are confident in our future growth prospects and our goal with this split is to make The Trade Desk stock more accessible to our employees and a broader base of investors.”