Source: Sharecast
The 20-for-one stock split is Amazon’s first since 1999, and looked to have been widely welcomed by investors. Announced late on Wednesday, the shares rallied in late trading before putting on more than 5% in pre-market trading on Thursday. The New York-listed stock closed at $2,785.58 on Wednesday.
Amazon, the world’s biggest retailer, is one of just a handful of US companies with shares worth more than $1,000 each. Although the stock split will not change its valuation, cutting the price in this way is expected to make the shares more accessible to a wider range of investors. Google owner Alphabet announced a similar move last month.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "Amazon’s proposed stock split speaks volumes about how the world of trading has changed. While such a move doesn’t mean too much for existing shareholders, it makes individual shares more accessible to everyday investors. The existential rise of low and zero-fee trading apps means stock splits are more important than they have been for a while."
Amazon also announced a $10bn share buyback alongside the stock split, which will replace a previous $5bn programme.
Lund-Yates said: "The buyback is another incentive to buy Amazon shares, but its scale may not be what it first appears. The $5bn programme has been running since 2016, and only a little over $2bn has been bought back under that initiative.
"Given the hammering tech stock sentiment has faced in recent months, giving itself permission to buy back huge swathes of its own stock is no bad move by Amazon."
Russ Mould, investment director at AJ Bell, said: "Spurred on by a 26% drop in the stock market’s value since the all-time high of July 2021, Amazon’s management is looking to instil fresh confidence with a stock split and $10bn share buyback.
"But the company may need to do more than start managing its share price as intently as it manages it customer services if the shares are to roar higher again, especially as the fourth-quarter numbers raised as many questions as they did answers."
Assuming shareholders back the move at the annual general meeting in May, the stock split will take effect on 6 June.