Amazon announces 20-to-1 stock split. A stock split and a massive buyback could just be the boost Amazon.com Inc. needs to break out of a spell of prolonged share price weakness.
Amazon said late Wednesday it intends to boost its outstanding shares by a 20-to-1 ratio, the e-commerce giant’s first stock split in more than two decades. That news, combined with a $10 billion share-buyback proposal, saw the stock advance 5% on Thursday, even as other mega-caps fell. Trading on a split-adjusted basis is expected to begin on June 6, according to a company filing.
Morgan Stanley analyst Brian Nowak said it’s encouraging that Amazon is turning more “shareholder friendly,” with the company joining the likes of Apple Inc. and Alphabet Inc. which have used splits to make their stocks more attractive to retail investors.
Historically, splits are positive events for the companies that enact them, according to data from BofA Global Research. The firm calculated that average returns a year after the announcement are 25%, compared with 9% for the overall market. Companies in the discretionary, tech, and health care sectors have averaged between 26% and 38% in the 12 months following a stock split announcement, it added.
Following a split, “investors who have wanted to gain or increase exposure may start to rush for the chance to buy,” wrote analyst Jared Woodard.
And that’s exactly what retail investors did on Thursday morning. The stock was the most bought on Fidelity’s platform, with buy orders more than double those for Apple Inc., the second-most bought stock. Amazon’s ticker was also the number one trending stock ticker on trader chatroom Stocktwits.
A stock split and a massive buyback could just be the boost Amazon.com Inc. needs to break out of a spell of prolonged share price weakness.
Amazon said late Wednesday it intends to boost its outstanding shares by a 20-to-1 ratio, the e-commerce giant’s first stock split in more than two decades. That news, combined with a $10 billion share-buyback proposal, saw the stock advance 5% on Thursday, even as other mega-caps fell. Trading on a split-adjusted basis is expected to begin on June 6, according to a company filing.
Morgan Stanley analyst Brian Nowak said it’s encouraging that Amazon is turning more “shareholder friendly,” with the company joining the likes of Apple Inc. and Alphabet Inc. which have used splits to make their stocks more attractive to retail investors.
Historically, splits are positive events for the companies that enact them, according to data from BofA Global Research. The firm calculated that average returns a year after the announcement are 25%, compared with 9% for the overall market. Companies in the discretionary, tech, and health care sectors have averaged between 26% and 38% in the 12 months following a stock split announcement, it added.
Following a split, “investors who have wanted to gain or increase exposure may start to rush for the chance to buy,” wrote analyst Jared Woodard.
And that’s exactly what retail investors did on Thursday morning. The stock was the most bought on Fidelity’s platform, with buy orders more than double those for Apple Inc., the second-most bought stock. Amazon’s ticker was also the number one trending stock ticker on trader chatroom Stocktwits.
