Amazon Stock Split: Will Amazon Surprise us with a split?

Amazon Stock Split: Will Amazon Surprise us with a split?
5 2 votes
Article Rating

Amazon Stock Split: Analysing the scope of yet another stock split of Amazon’s Stocks in the recent future.

Over the past few years, various high profile stocks have gained significant price post share split. For example, since Apple announced 4 –for-1 stock split on July 30, 2020, its shares have climbed more than 70% easily eclipsing 41% gains of S&P 500.

Since Tesla declared its 5- for -1 share split on August 11,2020, shares have soared by nearly 180% vs 35% for the S&P. Nvidia is another well-known example, announcing its share split on May 21, 2021. Since then, stock has surged nearly 75%, beating only 10% increase of the S&P.

A stock split is something very puzzling in the investment world. When shares are split, the number of shares in the market increases, but it decreases the share price in the same ratio and as a result of which nothing really changes about the company and its market cap remains the same – meaning that stock split should be technically non consequential.

With shares priced in excess of $3200 per share, will Amazon soon announce stock split?

Amazon Stock Split: Amazon Stock Split History

It is true that Amazon has grown from a bookseller to one of the largest and most influential companies of the world. Amazon has a history of stock split which is listed below.

Date
Split Ratio
Price before Split
2nd  June 1998
2:1
$85.68(1st  June 1998)
5th January 1999
3:1
$354.96 (4th  January  1999)
2nd  September 1999
2:1
$119.06(1st September 1999)

Amazon Stock Split: First Stock Split:2 June 1998

Amazon first stock split record date was 2 June 1998, 12 months after its 15th May 1997 IPO. The split was 2-for-1 and saw its share price halved. It closed at $85.68, day prior to the split and opened at $43.62 on the record date. A week after the split i.e. on 9 June 1998, share price was $51.24; and a month later i.e. on 2nd July 1998, shares ended the day at $124.02.

The sharp rise in the share price following the split also witnessed increase in daily trading volume of its stock, which went from around 8 million units in the start of June to somewhere between 28 million to 54 million at the start of July.

Amazon Stock Split: Second Stock Split:5 January 1999

The second stock split was three-for-one and it took place on 5 January 1999. This split reduced share prices from a close of $354.96 the day before the split to a price of $109.56 on 5th January 1999. Amazon closed at $138 on the next day.

A month later, Amazon closed at a price of $115.88 on 5th February 1999- a drop in price which was followed by a reduction in daily trading volume of Amazon stock around this time.

Amazon Stock Split: Third Stock Split: 2 September 1999

Amazon announced third stock split within 9 months from second split and the record date was 2 September 1999 and it was once again two-for-one stock split. The split halved the prices from $119.06 on 1st September to $57.50 on 2nd September. The share price on 2nd September closing was $60.06, a slight increase from post-split open. A month later from share split on 1 October 1999, share price had risen to $77.25.

Amazon Stock Split: Amazon Stock to Split Again in Future?

Amazon has witnessed an impressive growth curve in its share price since its last split and that has started speculations that another split is around the corner, as some traders believe that current share price is making Amazon stock inaccessible to retail people. While this is partly false as many broking firms allow for buying of fractional shares also, but it is all about creating perception, as some investors see a sticker price of more than $3200 and they label the stock as “expensive”.  

It is worth pondering that share price is meaningless and should never be a factor while deciding whether to purchase a share or not. Rather than share price, increased sales, widening profit margins and new lines of business are much more relevant to the decision of buying a share, more so when we have option to buy fractional share.

Another reason for Amazon to think of a future stock split would be if it wanted to enter on the Dow Jones Industrial Average. This is because Amazon high share price would have a disproportionate effect on Dow Jones Industrial Average, one way for Amazon to fix this is through a stock split which would reduce Amazon’s share price and have a more proportionate contribution in the market. But at the same time, only four of the world’s ten largest companies by market capitalization are included in the Dow Jones, with Amazon showing minimal interest to be included.

Amazon’s net sales grew by 38% year on year in 2020, representing Amazon’s biggest growth figure in the history but since then its growth rate is settled again to historical norms of around 30% for 2021. Amazon stock has doubled over the past three years, placing it fourth most valued publicly traded company in the US, with a market cap of more than $1.69 trillion.

It is also to be noted that there has been a considerable changing of the guard at Amazon in the recent months, with Andy Jassy taking the mantle of CEO from founder Jeff Bezos, since taking the helm of the e commerce giant, Andy has not touched the matter of stock split, but it seems to some that Amazon stock split is imminent.

Truth be told, no one knows that whether Amazon will announce stock split again and if yes, when? But, it is clear from the history in case of Amazon and from recent examples that stock split does provide a momentum, if not long term, at least short term and with all the major companies announcing stock split recently and US witnessing stock split becoming a rage again, it will not be surprising to hear Amazon stock split is in the cards. 

Also Read: Tesla Stock Split

Vineet Agarwal

Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

0 Comments
Inline Feedbacks
View all comments
0
Would love your thoughts, please comment.x
()
x