Amazon is a giant in the world of e-commerce. Amazon (NASDAQ: AMZN) has undergone a 20-for-1 stock split following the market closing on Friday, which brought its share price to $122.35, the lowest price it’s seen in the last 12 years.
Although splits do not alter a company’s financial performance or the fundamentals of a publicly-traded company, they can make shares more accessible to a wider variety of investors, particularly the retail investor, which can result in increased purchasing and a rise in the price. For example, on Friday, AMZN shares traded for over $2000 per share. It was up to $3,773.08 per share just a year ago, which put AMZN stock out of the reach of small investors. However, following the split on Friday, the public can now purchase the shares at under $125. The last time the share value was this low was back in 2010, coming from the financial crisis.
Amazon has announced the board of directors approved a 20-for-1 split of its stock and that the shares will begin trading on a split-adjusted basis today (June 6.). Who received news that Who would announce the stock split with enthusiasm by analysts and investors, many of whom have been pushing for the online retailer based in Seattle to cut the price of its shares through the process of a split. However, the surge in AMZN stock following the announcement about the separation was not long-lasting. Before today’s announcement, AMZN’s stock was down over 30% this year and was weighed down due to disappointing earnings and the general market decline in tech-related securities.
The split is four-time in the history that Amazon has divided its stock. The last time Amazon’s stock separated was in September 1999. The split was on an exchange of 2-for-1. Who split AMZN stock on a 2-for-1 base in June and on a three-for-1 base in January. Amazon’s share price was up by more than 4000% since its previous stock split more than twenty years back. This was just before the dot.com bubble burst. Amazon held its first open market (IPO) in 1997 when its share price was $1.73 each share.
What is the significance?
The split in the stock does not alter any aspect of Amazon’s business or its financial position. However, the lower price makes the stock more accessible to a larger range of investors, leading to more buying. Many companies view the split of their stock to draw interest from investors and provide their shares a boost for a short period. It’s not just Amazon. Amazon isn’t the only tech giant to announce a splitting this year.
In February, Google parent company Alphabet (NASDAQ: GOOG, NASDAQ: GOOGL) also announced a 20-for-1 split in its stock which will be in effect from July 15 this year. This is the first time Alphabet has divided its stock after 2014, when it was split on a 2-for-1 basis. In addition, there is a report of electric car manufacturer Tesla (NASDAQ: TSLA) is planning to also split its stock in 2019 despite having executed the 5-for-1 split in August of 2020. Finally, in August 2020, the giant consumer electronics, Apple (NASDAQ: AAPL), divided its stock on a 4-for-1 basis. Stock splits are common in U.S. public companies and are generally lauded by investors.
But, at the very least, one CEO has refused ever to divide his company’s stock. The shares in Class A that Warren Buffett owns Berkshire Hathaway (NYSE: BRK-A) have never been split, and consequently, they are currently trading at $472,426.11 for one share, which puts them out of the reach of the majority of the investors who are retail. Buffett has stated that he will never dilute the stock since the price is a draw for only serious investors. This helps ensure that investors hold the stock instead of actively trading the shares for a long time.
What’s next for AMZN Stock
We’ll find out if the split of the company’s stock triggers an upswing for AMZN stocks today. Investors who have always wanted to have shares of the company that is a major in e-commerce within their portfolios now have the option to do so at a lower cost. In the past, an investor with $2000 to spend could not purchase a single piece of Amazon stock. Today, the investor can purchase 16 shares of Amazon.