Best School News

Amazon Stock Split: What You Need to Know

Amazon Stock Split – Amazon’s stock has been on the rise for the past few months. It is now up 11.8% this year, and it has increased by 12.2% in the last twelve months. It’s no surprise that investors are drooling over Amazon’s recent success as it continues to grow exponentially. Recently, Amazon announced that they will be split their stock on July 17th, 2017. This article will outline how much your shares will be worth after the split and what you can do to prepare for the change.

Amazon Stock Split: What You Need to Know

Amazon’s stock has split on May 9th. It was the first time since 1997 that it did this. What does this mean for the company? What is a stock split? And what will the future hold for Amazon?
In this article, you’ll learn about Amazon’s stock split, how to calculate your new share value and what it means for the company.

Amazon Stock Split: What You Need to Know

Amazon announced a stock split, the company’s nineteenth since it went public in 1997. This is the first time Amazon has done a stock split on its own accord, and it’s happening because of an increase in the number of shares being bought by investors.

Related: How to Apply for Amazon Delivery Job

As with most announcements of this nature, there are a lot more questions than answers. The biggest question is what this will mean for current shareholders and their holdings. The answer to that question is not yet clear either. But one thing we do know is that there are some key things you need to know about Amazon Stock Split: What You Need to Know….

What is a stock split?

A stock split is a company’s decision to divide its existing shares into multiple shares. A company typically does this as an attempt to keep the price of its shares from getting too high, which would make it unaffordable for some investors.

Why did Amazon decide to do a stock split?

The stock split was announced on April 24, 2019. Amazon has experienced a significant increase in the number of its shares being bought by investors. This is mainly due to Amazon’s continued strong performance and growth over the last few years. The reason this has led to an increase in shares is because these investors are looking for better returns.

What are the benefits of a stock split?

A stock split does not necessarily have a direct correlation with the company’s performance. However, there are some benefits that come along with it. A stock split reduces the number of shares an investor needs to buy in order to get a certain percentage of the company. This makes it easier for investors who might want to purchase larger amounts of shares than they could afford before.

A stock split also can bring attention to a company that is otherwise flying under the radar. A company like Amazon is going global and has been expanding rapidly over the last few years. This can make it difficult for shareholders to keep up and have trouble understanding how their investments are doing because there’s so much happening on a day-to-day basis. A stock split is one way for them to see where they stand without having to spend hours researching on their own.

What are the risks of a stock split?

One of the risks with a stock split is that it can make shares more difficult to trade. For example, if you’re used to trading 100 shares, and then your company does a 2-for-1 stock split, then you’ll need 200 shares to trade. This could be confusing for those who are used to buying or selling in full share increments.

But there are also some benefits of a stock split. One benefit is that it often occurs when the number of outstanding shares have increased tremendously over time. A typical reason for this is an increase in investor demand for shares which in turn increases the share price. In these cases, the company may opt to do a stock split as way of making the share price more attractive and easier for investors to buy and sell.

Another benefit from a stock split is that it can serve as a signal to investors that the company has experienced extraordinary growth, which is usually accompanied by strong financial performance. If this is due to innovations in products or services offered by the company, then there’s no downside for shareholders who want their investment to grow with the company’s success.

How will this affect current holders of Amazon stock?

The first thing to note is that this doesn’t affect the number of shares you have or the value of your current holdings. The stock split does not change the amount of money each individual shareholder has, it only changes how many shares they own.

In layman’s terms, shareholders will now receive two shares for every one that they currently hold, but their total equity in the company will remain unchanged. This means that if you had 100 Amazon stocks before today and after the split you’ll have 200, but both your existing stake and its worth stay the same.

For example, if someone who owns 20 Amazon stocks (2 shares) has those stocks double in price from $700 per share to $1400 per share, their holdings are now worth a total of $2800 after the split—not $4200.

This is important because it means that investors may be less likely to sell their stock once it doubles in price after a split. That could mean more stability for Amazon’s stock for longer periods which is good news for everyone.

Amazon Announces 20-1 Stock Split

After the close of trading on March 9, Amazon’s board disclosed that they had approved a 20-1 stock split, as well as a $10 billion stock buyback. The board said the 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.”

When a company splits its stock, that means it divides each existing share into multiple new shares. In a 20-1 stock split, every share of the company’s stock will be split into 20 new shares, each of which would be worth one twentieth of the original share value.

A stock split does not impact a company’s market capitalization—the combined value of all its shares—and it doesn’t change the value of each investor’s stake in the company. It merely increases the number of shares outstanding and decreases the cost of each share.

Why Is Amazon Splitting its Shares?

A stock split is one sign that a company is thriving—and there’s no question that Amazon runs a very healthy business. In its 2021 annual report, released in February, Amazon reported revenue of $470 billion, up nearly 22% year-over-year. Net profit was $33.4 billion, a gain of more than 56% over the prior year.

While the business is undoubtedly thriving, Amazon’s stock price had fallen around 22% in 2022 so far. Note that this had less to do with Amazon’s own performance, and more to do with a stock market that has seen a big pullback in the face of big uncertainties over the last three months.

Nevertheless, one share of AMZN still required investors to shell out $2,785 at the time of the stock split announcement. That’s a tall order for new investors who want a piece of the action. Sure, some brokerages offer fractional shares of Amazon, but the fact remains that a high share price can be a turn-off for some.

Amazon’s Stock Split Could Help It Get into the Dow

There’s another reason Amazon may be choosing to split its stock right now: The possibility of being included as one of the 30 stocks that make up the Dow Jones Industrial Average (DJIA).

Unlike other leading stock market indexes, the DJIA is a price-weighted index. That means the 30 component companies in the Dow are weighted in the index according to their stock price—rather than their market cap, as is the case with S&P 500 component companies.

The DJIA includes some of the biggest companies by market cap in the U.S. stock market, but they also prefer to maintain a relatively even balance when it comes to share price. They don’t want high-priced stocks to have an outsized impact on the performance of the index.

“The Index Committee monitors whether the highest-priced stock in the index has a price more than 10 times that of the lowest,” wrote S&P Dow Jones Indices, which manages the index, in its most recent methodology statement for the DJIA.

Amazon’s stock split makes it more attractive as a component in the price-weighted Dow. It’s already among the largest companies on earth by market capitalization. At a split-adjusted price of $124 a share, Amazon would be right in the middle of the pack of share prices of current DJIA components.

Conclusion

When a company does a stock split, it goes from one share of stock to two shares of stock for every share that was owned before the split. This means that if you owned 100 shares of Amazon before the split and you purchased another 100 shares of Amazon after the split, you will own 200 shares post-split.

The major benefit of a stock split is that it can encourage more people to invest in the company. This can be a good thing for shareholders because the company will be able to grow more quickly and increase its share price. So, while Amazon stock has been up and down in the past few years, it might make sense to take advantage of a split and buy more shares.

Related Articles