Amazon stock split happened today and we wanted to explain what it means and what happens now… In March, e-commerce behemoth Amazon (AMZN 2.26%) announced that it would execute a 20-for-1 stock split, and shareholders voted in favor of it in May. Now that the Amazon stock split has been implemented formally, what has changed?
With indexes near all-time highs, companies announced split announcements in early 2019 to make their share prices more appealing to individual investors. The market has subsequently addressed the issue.
Why do companies like Amazon make a stock split?
Amazon and other companies like it do a stock split because it makes their stock more accessible to smaller investors, and the goal is that their shareholder base grows as a result of them. However, on a deeper level, the argument for investing in Amazon remains unaltered. Here’s what it is all about.
Amazon’s stock has taken a beating since the proposals were announced amid a broad market selloff that has been particularly harsh on the technology sector. After the split, Amazon’s shares rose 2% in New York, but they’re still down about 10% since March when it was announced. Since announcing its plan in March, Alphabet’s stock is down 17%.
The sell-off implies that the companies will be priced below the sticker price originally intended by executives. That will make it simpler for the behemoths to join the Dow Jones Industrial Average, which is weighted by share price but may lead them to appear less royal than their massive market values and track record of large gains would suggest.
You can also read about: Amazon copied best-selling products and manipulated search results, according to Reuters
Do stock splits have any effect on the share value?
Stock splits have no impact on the company’s share value. Imagine this, you are changing a $20 bill into two $10 bills, that’s the same. However, in the optimistic environment of early 2022, they were targeted with bidding battles by gleeful traders.
Following the retail behemoth’s 20-for-1 stock split, which was voted on by shareholders last month, Amazon shares will begin trading at around $122 on Monday.
The move, which is expected to send shares tumbling from their Friday close of $2,440, is anticipated to bring in a new crop of investors while rewarding existing holders.
Amazon said in a statement: “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.”
Investors on record will receive 19 extra shares for each one they held as part of the company’s filing with the Securities and Exchange Commission.
How is Amazon doing now?
Amazon’s stock has tumbled more than 26% this year amid the corporate market selloff that has shaved over 23% from the Nasdaq Composite, with investors grappling with a slowing economy and near-record high inflation against the backdrop of the Federal Reserve’s rate tightening cycle.
Additionally, Amazon announced they lost money for the first time in three years. The company lost $3.8 billion or $7.56 per share compared to $8.1 billion, or $15.79 during the same period a year ago.