Amazon’s shares are about to get 20-times less expensive after the retail platform’s board rubber-stamped a 20-for-1 stock split.
Shares in Amazon closed overnight on Wednesday (9 March 2022) at $2,785.58, so if the stock split was to happen today, it would see the shares start trading this afternoon at $139.28.
Investors have given their backing for the stock split, with Amazon’s share price rallying more than 6% in after-hours trading overnight on Wednesday to $2,952.
The decision will go to a shareholder vote in May and, if approved, be actioned on 6 June 2022.
BOOST TO UK’S RETAIL INVESTOR ARMY
Almost every investor and retirement saver in Britain has a stake in Amazon, even if they don’t know it. As the S&P 500’s fourth largest company, valued at $1.42 trillion, it is widely held by global and US-focused actively managed and tracker funds, such as the Vanguard S&P 500 (VUSA) and Invesco EQQQ Nasdaq 100 (EQQQ) ETFs, and the HSBC FTSE All-World Index (BMJJJF9) fund.
Popular active fund Amazon owners included Terry Smith’s Fundsmith Equity (B41YBW7) and the Scottish Mortgage (SMT), among the most popular funds and investment trusts among AJ Bell customers, according to data from the investment platform.
Companies split their stock for numerous reasons despite the process not fundamentally changing the value of the company. But the most likely reason is to put the shares within reach of more small, individual investors.
WHY NOW FOR AMAZON?
Apple and Tesla announced stock splits in 2020 but the decision in February 2022 by Google-owner Alphabet to split its stock may have acted as the catalyst to get other companies to act. Alphabet’s ‘recent 20-for-1 announcement may attract attention from other companies and spark a wave,’ wrote Jared Woodard, investment and exchange-traded fund strategist at Bank of America.
‘This split would give our employees more flexibility in how they manage their equity in Amazon and make the share price more accessible for people looking to invest in the company,’ Amazon said in a statement.
Amazon may also want to gain inclusion to the long-established Dow Jones Industrial Average index, which tends to include less expensive stocks.
Apple, for example, announced a 7-for-1 stock split in 2014 and got included in the Dow in 2015. Amazon's split is no guarantee that it will be included in the Dow, but the index may want the world's most valuable retailer, which is also a major cloud provider and media giant.
