Amazon’s board made a surprising move this week. On Wednesday, the company announced a 20-for-1 stock split to revalue the company’s shares at a significantly lower price point for individual investors. The board has already approved the stock split, the first stock split in more than two decades, reports GeekWire. If shareholders approve the split at the company’s annual meeting on May 25, the change will go into effect in June.
“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,” said an Amazon spokesperson in a statement.
Each shareholder of record as of May 27, 2022 will receive 19 additional shares for every one share they hold as of June 3, 2022. Trading is expected to begin on a split-adjusted basis on June 6, 2022. CNBC says that, after announcing the split, Amazon had its second-best day of trading in 2022. As of yesterday, a 6:45 p.m. Eastern, Amazon stock was valued at $2,936.35 per share.
If the stock split were to occur at that share price, each share would be worth $146.82 per share. This would not change Amazon’s overall value, but at a lower price point, more investors may be interested in Amazon stock. At its current price, buying stock in Amazon is out of reach for many everyday investors, unless they can buy fractional shares through their brokerage firm.
This is the ecommerce company’s fourth stock split since the company’s IPO in 1997, reports CNBC, and the first one since 1999. Previous splits were done in June 1998, January 1999 and September 1999.
In addition, on March 9, Amazon’s board of directors authorized the company to repurchase up to $10 billion of the company’s common stock, according to an 8-K filing with the Securities and Exchange Commission.
Alphabet also doing a 20-for-1 stock split
Amazon is not the first to announce a stock split this year. In February, Google parent Alphabet announced a 20-for-1 stock split when reporting its fourth quarter and fiscal year 2021 results, its first stock split since 2014. The Alphabet board approved a one-time special stock dividend on each share of Class A, Class B and Class C stock. If approved by shareholders, shareholders of record on July 1, 2022 will receive a dividend of 19 additional shares of the same class of stock for every share held by the shareholder after the close of business on July 15, 2022.
Similar to the situation with Amazon, a stock split will allow more investors to buy Google stock at a lower price. As of 6:20 p.m. Eastern yesterday, Google stock was valued at $2,648.59 for Class A stock. If the stock split were to occur at that share price, each share would be worth $132.43.
These are interesting moves from major players in the tech and ecommerce space. Why do companies do stock splits? There are a range of reasons, but the bottom line is that splitting stock does not necessarily alter a company’s financial position. It does, however, attract investors who now find the purchase of Amazon or Alphabet stock within reach. Will more companies try stock splits in 2022? If so, who?