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A Look at Amazon’s Stock Split

Plus500 | Thursday 02 June 2022

Following the same pattern as the last few weeks, the stock market was also volatile yesterday causing major US indices like the tech-heavy Nasdaq (US-Tech 100) to fall by 0.74%. Nevertheless, multinational tech and E-commerce giant, Amazon, which is a component of the Nasdaq, was able to fare better than its peers. 


Amazon’s Prime Gains

While many Nasdaq-listed stocks like Apple(APPL) and  Tesla (TSLA) closed Wednesday’s trading day with losses, Amazon (AMZN), one of the largest E-commerce companies in the world, rose by 1.2%. 

This relatively steady rise, which comes at a time of market volatility resulting from inflation, the war in Ukraine, and monetary policy changes, is believed to be the result of many optimistic investors who are eager for cloud computing and E-commerce mogul’s stock split to come to fruition tomorrow.

On March 9th, Amazon declared its intention to split its stock by 20-for-1. Later on, the split was approved by its investors and shareholders last Friday as nearly 425 million of them voted in its favor. Following that vote, the stock started climbing up over the course of the week as it rose by about 14% since last Wednesday causing it to have a 5-day winning streak. Moreover, many analysts have recently shifted their outlook on Amazon by upgrading it into a buy-worthy stock, which could also have led to its growth.  

 What You Need to Know About Stock Splits

A stock split isn’t foreign to Amazon or its shareholders. In fact, tomorrow’s much-anticipated split will be the first since the dot-com boom and the fourth stock split since its IPO in 1997 as it also split during 1998, and twice in 1999. So can this time render any differences for the tech giant’s stock?

While stock splits might sound dramatic to some, in their essence, they do not cause any fundamental changes in the company. However, they are deemed as good news to investors who aim to partake in the growth of a company’s stock as they make its shares more affordable. This is because each existing share of a company is now worth one-twentieth of its original value. Along those lines, for every stock Amazon’s existing shareholders own, they’ll get 20 shares.  But that’s not all, in March Amazon also claimed that the split is aimed at helping its staffers by giving them more flexibility to manage their equity in the company. Announcing this came in wake of Amazon's decision in February to increase its maximum base salary for corporate workers.

Other Major Stock Splits

While Amazon might be the latest highly-valued tech behemoth to have split its stock and decreased the price of its shares, in recent years other tech giants took the same path. 

In 2020, Apple declared a 4-for-1 split and many market watchers posit that this split is behind the rise in Apple’s market capitalization and a surge in its stock price over the years. In 2022 as well, there might be some anticipated stock splits for major tech companies on the line. In February, Alphabet (GOOG) also announced a 20-for-1 split which will become effective on the 1st of July following underwhelming Q1 earnings results and revenue miss. While many analysts and market watchers seem to be split on whether Alphabet will be able to rebound soon, the prospect of its anticipated stock split might act as a breath of fresh air for interested investors. 

In March, EV maker, Tesla, also announced its intention to split its stock. While the stock split is still a blurry and uncertain prospect for Tesla, many believe that in its approaching August investors' meeting, the votes will probably be in favor of a split. This is because the EV giant has experienced dreary losses over the past year. This might be because, Tesla has lost about 18% of its value since the beginning of May, as it struggled to keep its production lines going in face of the COVID-19 lockdown in Shanghai last month. Moreover, following the news on April 12th that Elon Musk had acquired Twitter, some investors may have been concerned that his attention would be diverted from Tesla. These factors combined devastated this EV maker’s stock, and this may accelerate its stock split. 

What’s Next?

Those who follow the markets may be keeping a keen eye on tomorrow's long-awaited stock split. Nevertheless, it remains unclear whether this split may prove beneficial for the company and its shareholders and it might be affected by other factors such as inflation and the war. In the meantime, however, it appears that even before this split takes shape, Amazon seems to be on a positive trajectory.

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