It was announced on Wednesday that shareholders will receive an additional 20 shares for each share they now possess, Amazon’s first stock split since the dot-com bubble burst. Extended trading saw the stock rise by 6%.
It also announced that its board has given the green light to buy back shares worth up to $10 billion.
Splitting a company’s stock is purely symbolic, adding little more than a lower price point to make the shares more accessible to a wider range of investors.
The price of each share would drop from $2,785.58 to $139.28 if the split occurred as of Wednesday’s closure, and each existing holder would receive 19 more shares for the one they currently own.
Every existing shareholder would receive an additional 19 shares for everyone they held if the split occurred as of Wednesday’s close.
Amazon is the latest high-tech corporation to split its stock in order to lower the price of each share. February saw the announcement of a 20-for-1 split by Google parent Alphabet. Apple announced a 4-for-1 split in mid-2020, while Tesla informed investors of a 5-for-1 split.
It hasn’t been a smooth ride for Amazon CEO Andy Jassy since he took the helm in July. In 2022, the stock has fallen by 16 percent, which is in line with the overall slump in the IT sector. Activist investor Dan Loeb, worth an estimated $1 trillion, recently told investors on a private call that he believes Amazon has around $1 trillion in untapped value. Amazon recently posted its weakest growth rate since 2001, according to a recent Wall Street Journal report.
For the second time this year, Amazon has tweaked its compensation approach in an effort to improve its employees.
An Amazon spokeswoman said in a statement, “This split would allow our workers more freedom in how they handle their equity in Amazon and make the share price more accessible for others wishing to participate in the firm.”
An increasingly competitive labor market prompted Amazon to raise its highest base wage for corporate employees to $350,000 last month — up from $160,000. Employees have pushed Amazon to make changes after the stock price underperformed in 2021, which has been a long-standing strategy for the business to attract top talent.
Shareholders of Amazon will receive the proceeds of the stock split on June 3 at the close of business, and trading will resume on June 6 on a split-adjusted basis.
When Amazon was just a tenth of its current size in 1999, the company’s stock split was its fourth since its IPO in 1997. On June 2, 1998, it was divided in half; on January 5, 1999, it was split in half again; and on September 2, 1999, it was split in half again.
Shares of Amazon have soared more than 4,300 percent since the company announced its previous split in 2012.
— This story was written in part by Ari Levy of CNBC.