Amazon.com Inc is planning to split its stock for the first time in more than two decades in a move that would end an era of four-digit stock prices for the biggest US technology companies.
Amazon intends to boost its outstanding shares by a 20-to-one ratio under a plan disclosed late on Wednesday, joining other technology giants such as Alphabet Inc and Apple Inc that have turned to splits to make their stocks more attractive to retail investors.
That news combined with a US$10 billion share buyback authorization sent Amazon shares up as much as 11 percent in New York post-market trading.
Photo: Reuters
As Amazon’s stock price has ballooned over the past few years, speculation about a potential split has been a frequent subject of speculation, which was only heightened by Alphabet’s proposed 20-for-one split disclosed last month.
Amazon conducted three splits in the two-and-a-half years following its 1997 initial public offering, but then halted the practice.
The topic occasionally came up at Amazon shareholders’ meetings, but the company had not taken action until now.
The e-commerce giant in an e-mailed statement said that the split is aimed at giving employees “more flexibility in how they manage their equity,” as well as making the stock “more accessible” for average investors.
Amazon’s split, like Alphabet’s, requires shareholder approval and would take effect in June if cleared.
Amazon is learning from Apple how a slower-growing technology company can still be a popular investment, DA Davidson & Co analyst Tom Forte said.
“The stock split is kind of an old school strategy to lower your share price to stimulate interest among retail investors,” Forte said. “The stock buyback tells investors they have plenty of money sitting around and aren’t planning a big investment on building new warehouses.”
Alphabet and Amazon are the last two of the five biggest US technology companies by revenue that have four-digit stock prices.
Amazon shares closed at US$2,785.58 on Wednesday, up more than 4,000 percent since its last stock split in September 1999.
Share splits almost disappeared from US stock markets in the past few years, with only two in 2019 compared with 47 splits in the S&P 500 in 2006 and 2007.
However, Apple and Tesla Inc have helped revive the practice after splitting their stocks in 2020.
A lower stock price makes it easier for mom-and-pop traders to buy shares rather than purchase fractional stocks through their brokerage firms. It might also pave the way for inclusion in indices such as the Dow Jones Industrial Average — which is weighted by companies’ stock price and not by market capitalization.
Amazon shares have fallen 16 percent this year amid a broad sell-off of technology stocks as the US Federal Reserve prepares to raise interest rates.
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