Amazon Stock 20-for-1 Split will encourage more investors to buy in
- Posted on March 10, 2022
- Stock Market
- By Glory
Amazon.com Inc announced
on Wednesday that its board of directors approved a 20-for-1 stock split and a
$10 billion buyback of its stock, pushing the shares of the company up 7% in
extended trade.
Stock splits are purely
ornamental and have no impact on the company's operations, except for
potentially making the shares more accessible to a wider number of investors
due to their lower price.
The move is Amazon's
first stock split since 1999, and shareholders will receive 19 extra shares for
every share they own. On June 6, trading will commence using the revised share
price.
The share split disclosed
by Google parent Alphabet Inc (GOOGL.O) last month is comparable to Amazon's.
Since 2020, several megacap businesses have divided their equities, including
Apple Inc (AAPL.O), Tesla (TSLA.O), and Nvidia (NVDA.O).
"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," an Amazon spokesperson said.
Shares of Amazon stock closed
at $2,785.58 on Wednesday, nearly doubling its value in the last two years, as
demand for its e-commerce and cloud-based services soared in the aftermath of
the COVID-19 outbreak.
The stock repurchase
replaces Amazon's prior $5 billion stock repurchase authorization from 2016,
during which the company bought back $2.12 billion of its shares.
The company's market cap
was around $1.4 trillion as of Thursday's close after shares fell about 16%
during a tech rout this year.
Amazon's current CEO, Andy
Jassy's term, which started in July, had a rocky start. Last year, Amazon stock
was the lowest performer among Big Tech companies and has plunged 16% so far
in 2022, joining a sector-wide slide. According to a recent Wall Street Journal
release, renowned activist investor Dan Loeb, told investors on a private call
that the company has around $1 trillion in untapped value.
Amazon, which has
previously tweaked its compensation plan, claims that the current modification
is aimed at assisting corporate employees.
As it competes with a
highly competitive labor market, Amazon increased its highest base wage for
corporate personnel to $350,000 from $160,000 last month. Amazon has
traditionally depended on big stock incentives to attract top talent, but the
company's stock underperformed in 2021, putting pressure on the corporation to
make changes.
Amazon stockholders will
receive dividends from the stock split at the market close on June 3, and
trading will resume on a split-adjusted basis on June 6.
This is Amazon's fourth
stock split since its initial public offering (IPO) in 1997, and the first
since 1999 when the business was a quarter of its current size. On June 2,
1998, it divided two-for-one; on January 5, 1999, it split three-for-one; and
on September 2, 1999, it split two-for-one.
Since the last split, Amazon's stock has increased by over 4,300%.
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