Amazon’s board announced on Wednesday that it had officially approved a 20-for-1 stock split. Additionally, the e-commerce giant, whose shares have struggled throughout 2022, was approved to repurchase up to $10 billion in stock, further pushing up its already hefty valuation even more.
The decision marks the first stock split Amazon has seen since the dot-com boom back in 1997. Before that, Amazon had seen three separate stock splits prior to the crash, with management since then opting not to go for stock splits until now. Management told investors on Wednesday that they’ll shortly receive 20 shares for each existing share they currently own.
Although stock splits are mainly cosmetic and don’t change a company’s fundamentals, they tend to increase trading volume a bit, as shares become more accessible to more people due to their lower price.
Despite this, markets tend to react positively when stock splits happen, seeing it as a good sign that the business is doing well, whether justified or not. Conversely, struggling companies often use reverse stock splits to meet the minimum price requirement to list on public exchanges.
So far, Amazon is the latest highly valued tech giant to go for a stock split. Back in February, Google parent Alphabet announced a 20-for-one stock split of its own. Apple announced its own plans for a stock split a long time ago, while Tesla told investors that it’s thinking of going ahead with a five-for-one split.
“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 representative in a statement.
Amazon has recently made a few changes to how it compensates its employees. This includes boosting the maximum salary for corporate workers from $160,000 to over $350,000 amidst a consistently tighter labour market. In the past, Amazon has relied on its stock rewards to attract top talent, but shares that have fallen over the past year have pressured the company to make changes in this regard.
Shares of Amazon were up over 6% following the news. Since the year began, the retailer has plummeted over 19.8%, similar to most other big tech stocks.
With the overall market transitioning from growth into value stocks, especially with the prospect of higher interest rates and inflation, it’s not surprising that Amazon would be one of the big causalities from this shift. It also doesn’t help that many experts wonder if Amazon has that much room to grow anymore. In contrast, other e-commerce and retail stocks that aren’t as big as Amazon have done a lot better over the past few weeks.
Amazon Company Profile
Amazon.com Inc is a leading online retailer and one of the highest-grossing e-commerce aggregators, with $386 billion in net sales and approximately $482 billion in estimated physical/digital online gross merchandise volume, or GMV, in 2020. Retail related revenue represented approximately 83% of total, followed by Amazon Web Services’ cloud computing, storage, database, and other offerings (12%), and advertising services and cobranded credit cards (6%). International segments constituted 27% of Amazon’s non-AWS sales in 2020, led by Germany, the United Kingdom, and Japan. – Warrior Trading News
