Wall Street Has a New Blockbuster Stock Split Coming in 2027 -- It's an Artificial Intelligence (AI) Stock That's Up 1,615% in 14 Years

Stock splits are a form of financial engineering that companies can use to alter their stock prices for a whole host of reasons. They essentially allow companies to simultaneously change their stock price and share count outstanding without moving the market cap.

Companies may conduct traditional stock splits if their stock price has risen significantly and they want to make it feel more affordable, particularly for retail investors. This also increases the number of shares outstanding and, therefore, liquidity.

The opposite of a traditional stock split is a reverse stock split, which can raise a company's stock price if it has fallen out of minimum price compliance on a major exchange.

Wall Street just learned about its next major stock split, scheduled for 2027. It's being done by a major artificial intelligence (AI) company whose stock has surged 1,615% during the past 14 years since its initial public offering (IPO).

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Maintaining control of voting power

During its third-quarter earnings report, the "Magnificent Seven" AI hyperscaler Meta Platforms (NASDAQ: META) said that it plans to conduct a 2-for-1 stock split on Jan. 19, 2027.

In a traditional 2-for-1 stock split, shareholders will see their share count double. The stock price will then be cut in half, so the market cap remains unchanged.

Meta plans to create a newly established Class C non-voting common stock, so every Class A and super-voting Class B shareholder will receive one share of the newly created Class C stock.

One reason for the move, according to Meta's earnings report, is to ensure that co-founder and Chief Executive Officer Mark Zuckerberg maintains his voting control, which is more than 60% of the voting shares, mainly through his ownership of super-voting Class B shares, according to a recent securities filing.

"The Special Committee concluded that Mr. Zuckerberg is best suited to lead Meta into its next era and beyond. They recognized that Meta's track record of significant value creation for its shareholders is in large part due to his strong leadership, unique and creative vision, and exceptional management abilities," Meta stated in its earnings report. "The creation of the Class C common stock will continue the founder-led model that has driven the company's success since its inception."

The creation of the shares also comes as California voters will soon head to the polls to vote on Proposition 40, a proposal that would levy a one-time 5% wealth tax on California residents with a net worth of more than $1 billion.

The securities filing also noted that Zuckerberg has only taken a $1 annual salary since 2013. If Zuckerberg had to sell some of his class B stock to cover the tax liability, it could be large enough to lower his voting control to roughly 53%, the filing stated.

The filing also states Zuckerberg will be able to sell 20% of the Class C shares he receives "without restriction."

The split could be foreshadowing another large equity raise

In its earnings report, Meta also said the new Class C common stock could help fund its growth, particularly as it continues to make huge AI capital expenditures (capex), primarily to build data centers.

Once the Class C shares are created, Meta could issue new shares to raise funding without diluting Zuckerberg's voting power.

Meta already plans to spend $135 billion to $145 billion on AI capex this year and just reported negative free cash flow in the third quarter. Furthermore, the company continues to believe it will need to raise hundreds of billions of dollars more to continue supporting its AI build-out.

JPMorgan Chase analyst Doug Anmuth recently wrote in a research note that Meta should raise capital "sooner" than later to remove an "overhang" on the stock right now, according to Barron's.

Ultimately, everything Meta is doing shows how a stock split can be used to advance a corporate agenda.

JPMorgan Chase is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase and Meta Platforms. The Motley Fool has a disclosure policy.