new Delhi: According to a Bloomberg report, US e-commerce major Amazon.com is planning to split its stock for the first time in more than two decades, a move that would end the era of four-digit stock prices .
According to the report, Amazon intends to increase its outstanding shares to a 20:1 ratio, as part of a plan revealed late Wednesday, joining other technology giants such as Alphabet Inc. and Apple Inc., which have made their shares more attractive. To create has turned to division. retail investors.
That news, combined with a $10 billion share-buyback authorization, sent Amazon shares up nearly 11 percent in post-market trading in New York.
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As Amazon’s share price has risen over the years, a possible split has been the subject of constant speculation, fueled by Alphabet’s proposed 20-for-1 split that was revealed last month. Amazon made three splits in the 2 1/2 years following its 1997 initial public offering, and then discontinued the practice. This topic occasionally came up in Amazon’s shareholder meetings but the company had not taken any action so far.
In an emailed statement, Amazon said the split aims to give employees “more flexibility in managing their equity” as well as make the stock “more accessible” to average investors. Amazon’s split, like Alphabet, requires shareholder approval and, if approved, will take effect in June.
Amazon is learning from Apple about how the slow-growing technology firm can still be a popular investment, said Tom Forte, an analyst at DA Davidson & Co.
“Stock splits are an old-school strategy among retail investors to lower their share price to stimulate interest,” Forte said. “Stock buybacks tell investors that they have a lot of money and are not planning a big investment on building new warehouses.”
Alphabet and Amazon are the last two of the five largest US technology firms by revenue with four-digit stock prices. Amazon shares closed Wednesday at $2,785.58, up more than 4,000 percent since its last stock split in September 1999.
According to data compiled by Bloomberg, stock splits almost disappeared from US stock markets until recently, with only two in 2019, compared to 47 splits in the S&P 500 in 2006 and 2007. But it has helped revive the practice after Apple and Tesla Inc. split their shares in 2020.
The stock’s low price makes it easier for mom-and-pop traders to purchase shares through their brokerage firms instead of purchasing fractional stocks. It could also pave the way for inclusion in an index like the Dow Jones Industrial Average, which is weighted by a companies’ stock price, not its market capitalization. Amazon shares are down 16 percent this year amid a broad sell-off in technology stocks as the Federal Reserve prepares to raise interest rates.