High-flying share prices for Lululemon Athletica Inc. (TSX:LLL; Nasdaq:LULU) spurred the company to split its shares on the TSX July 6. Shares are set to split on the Nasdaq July 12.
Companies often split their shares when stock prices get high because of conventional wisdom that it could deter investors from buying blocks of 100 shares.
North Growth Management lead portfolio manager Rory North said this is “ridiculous” yet remembers in the 1990s when high tech stocks would split and the next day pop 10%.
The strangest thing about Lululemon’s split, he told Business in Vancouver July 7, is that it is being done on Canadian and American exchanges on different days.
“It’s weird,” North said. “I’ve never heard of that happening.”
Oddity aside, Lululemon’s shares on Nasdaq have skyrocketed to US$121.70 on July 7 from US$4.50 in March 2009.
Founder Chip Wilson, who owns about one-third of the company, has seen his net worth soar. It dropped to less than $200 million at the recession’s nadir from more than $1.5 billion in 2008 but is now estimated to be more than $3 billion.
Business in Vancouver estimated Wilson’s net worth at about $2 billion in February. (See: “Lululemon founder not buying into Olympic Village” – BIV Business Today; February 8.)
The next month, Forbes Magazine included Wilson in its list of 1,210 billionaires for the first time. It ranked him No. 651 with a net worth of US$1.9 billion.
Lululemon’s stock has gone up about 60% since then.
Wilson first sold 48% of Lululemon for $108 million to two private equity firms in 2005. He shed a further 12% two years later as part of the company’s IPO.
Since then, Wilson has told BIV that he has “given” shares to employees. (See “Net worth plunging, but those who have got are still giving” – issue 1012; March 17-23, 2009.)
He told BIV in February that the company’s stock is doing so well he has no desire to sell it.
Outside Lululemon, Wilson is active in the two charities he started: imagine1day and Chip’s Not Dead Yet Memorial Mile.
Glen Korstrom
Twitter: GlenKorstrom