Amazon jumps on its plan to split shares by a 20-to-1 ratio and buy back up to $10 billion


Amazon.com Inc. plans to split its shares for the first time in more than two decades, ending an era of four-digit stock prices for America’s biggest tech companies.

Amazon intends to boost its outstanding shares by a 20-to-1 ratio, under a plan unveiled late Wednesday, joining other tech giants like Alphabet Inc. and Apple Inc. are geared towards splits to make their stocks more attractive to retail investors. That news, combined with a $10 billion stock buyback authorization, sent Amazon shares soaring as much as 11% in post-market trading in New York.



While Amazon’s stock price has skyrocketed over the years, a potential split has been a frequent topic of speculation, only heightened by Alphabet’s 20-to-1 split proposal disclosed last month. last. Amazon carried out three spinoffs in the 2.5 years after its IPO in 1997, then ended the practice. The topic has occasionally come up at Amazon shareholder meetings, but the company hasn’t done anything so far.

The e-commerce giant, in an emailed statement, said the split aims to give employees “more flexibility in how they manage their equity” as well as make the stock “more accessible for average investors. Amazon’s spin-off, like Alphabet’s, requires shareholder approval and would go into effect in June if approved.

Amazon is learning from Apple how a slower-growing tech company can still be a popular investment, said DA Davidson & Co. analyst Tom Forte.

“The stock split is kind of an old-fashioned strategy to drive down your stock price to drive retail investor interest,” Forte said. “The stock buyback signals to investors that they have plenty of money and that they are not planning large investments in the construction of new warehouses.”

Alphabet and Amazon are the last two of the five largest U.S. tech companies by revenue to have four-digit stock prices. Amazon stock closed at $2,785.58 on Wednesday, up more than 4,000% since its last stock split in September 1999.

Stock splits had all but disappeared from U.S. stock markets recently, with just two in 2019 compared to 47 splits in the S&P 500 in 2006 and 2007, according to data compiled by Bloomberg. But Apple and Tesla Inc. helped revive the practice after splitting their shares in 2020.

A lower stock price makes it easier for mom-and-pop traders to buy stocks rather than buying fractional stocks through their brokerage firms. It can also pave the way for inclusion in indices such as the Dow Jones Industrial Average, which is weighted by companies’ stock prices, not market capitalization. Amazon shares have fallen 16% this year amid a sell-off in tech stocks as the Federal Reserve prepares to raise interest rates.

Michael Pachter, an analyst at Wedbush Securities Inc., said the stock split was also most likely part of broader pay changes underway at Amazon, as workers feel less aggrieved if they receive a full share of the stock instead. than a fractional share.

“Stocks that trade at $100 or less have a larger retail investor base, but I don’t think that’s why Amazon is doing this,” Pachter said. “It means absolutely nothing, except that Grandpa can buy little Johnny a share of Amazon stock.”

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