Amazon’s Stock Split Basically ‘Making Change,’ But Might Drive Investment Interest
Amazon’s stock price looks different today as the stock split took effect. Amazon’s board approved the 20-for-1 stock split announced in March at the 2022 Annual Meeting of Shareholders on May 25. The split will likely enable more investors to afford to invest in Amazon, and presumably broaden the company’s audience and reach.
The stock closed at $2,387 on June 3, started trading at around $120 on June 6, and was up 0.7% in pre-market trading.
According to Kiplinger, markets like splits as they give investors more flexibility, while bearing no impact on a company’s fundamentals or valuation.
“That’s because a split is essentially the same thing as making change. In this case, shareholders will effectively be swapping a $20 bill in return for 20 $1 bills,” Kiplinger’s Dan Burrows reported.
In addition, Barron’s reports another possible boost to the stock is that the stock split makes the company a candidate for inclusion in the Dow Jones Industrial Average (DJIA), as the DJIA weights components by price.
“A high-price stock moves the index more than a low-price one, and a four-figure stock would wield outsize influence on the index. But that change won’t happen quickly. The last change to a Dow component was in 2020, when Amgen, Honeywell, and Salesforce swapped in for Exxon Mobil, Pfizer, and Raytheon,” Barron’s reported.
Amazon is part of a slew of companies that have recently announced stock splits. Shopify announced one in April, and meme stock darling GameStop announced on March 31 that it will request stockholder approval for a stock split at the upcoming 2022 annual meeting, according to a Securities and Exchange Commission (SEC) filing.
Other companies making similar announcements include Tesla in late March, and Amazon and Alphabet, which announced a 20-for-1 stock split in March and February, respectively.