Stock Split announcement from Amazon marks the First move after 2 Decades

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The shares of Amazon are sharply moving upward after hours of trading. The key reason behind the move was the recent announcement from the cloud-computing and e-commerce giant. The company announced an extended stock-repurchase program with declaring a 20-for-1 stock split.

However, the stock split doesn’t theoretically add any benefit value for shareholders. They are financially identical for cutting a cake into small pieces, though retail investors aim to like them. Keep in mind that most of the split announcements often initiate short-term rallies during trading.

The shares of Amazon (ticker: AMZN) were increased 6.3% to $2,961 during premarket trading on Thursday. The stock of Amazon is reportedly splitting into 20 bite-sized pieces for the attraction of retail investors. The stock splitting move came for the first time after at least 20 years.

The 20-to-1 stock split will significantly decrease the infamously expensive share price after the approval of Amazon shareholders. It is noteworthy that one share of Amazon stock currently costs around $3,000. This level could decrease to around $150 per share if the shareholders of Amazon allow the split.

It is supposedly useful to attract new retail investors as well as earn a spot in the Dow Jones Industrial Average. An 8-K filing with the US SEC on March 9 pointed to the split news and a new $10 billion stock buyback. However, the stock of Amazon increased around 7% in the after-hours trading.

Key Reasons behind the Stock Split

The stock splitting is often considered a marketing move designed at creating more desired and high-priced stock for retail investors. The company said the stock split will provide more flexibility to its employees to manage their own equity in Amazon.

It would provide a more accessible share price for new investors. Point to be noted that Amazon was established 5 years ago and has split its shares 3 times after the final move in 1999.

However, no-fee trading on major apps and brokerages such as Robinhood. It allowed major publicly traded tech companies to make stock splits move during recent years. Retail trading also boosted during the economic crisis and pandemics.

More Companies using Stock Split

Tesla and Apple split 5-to-1 and 4-to-1 respectively on the same day in August 2020, while Nvidia split 4-to-1 in July 2021. The stock split of Amazon 20-to-1 is obviously unusual but not groundbreaking. Alphabet is the online search, advertising, and parent company of Google, which last month offered a 20-to-1 split.

It is important that Amazon’s stock share price was at $2,600 on March 09, 2022. Experts believe the stock splits will efficiently provide a path into the Dow Jones Industrial Average. Amazon has recently made settlements to its compensation mechanism as the latest change aimed at helping corporate workers.

A spokesperson of Amazon said the recent split will provide more flexibility to its employees to maintain their integrity. It would provide more accessibility to the share price for interested people to invest their money in Amazon. The company increased its maximum basic salary for corporate workers from $160,000 to $350,000.