International Finance

Amazon goes for a stock split, follows Google, Apple

IFM_Amazon stock split-image
This is the first such move by the tech giant after 1999 when it went for a 1:3 split.

The Amazon board has decided to go for a 20:1 stock split and buyback of $10 billion worth of shares. This is the first such move by the company since 1999 when it had announced a similar stock split. In 1999, the company went for a 1:3 split.

For existing stockholders, there is no fundamental change given that their total portfolio valuations remain the same and get divided into a larger number of shares. This exercise is usually seen as a cosmetic change and gives the opportunity for individual investors to buy a company’s stock which would otherwise appear costly. Analysts also point out that with a more reasonably priced stock, the company might find itself in the basket of Dow Jones industrial average.

According to the company, the new price of stocks will be put to effect starting June 6.

This move by Amazon follows Alphabet, the parent company of Google which announced a similar split in February. Apple and Tesla too, have announced similar stock splits in recent times. The move by Apple in February had also seen similar positive sentiment. According to Barrons, historically values of companies appreciated by 7.8% within three months of the stock split announcement.

The company said that this decision of splitting its stock was aimed at making its employee stock ownership plan more robust and flexible.

“This split would give our employees more flexibility in how they manage their equity in Amazon and make the share price more accessible for people looking to invest in the company,” Amazon said in a statement.

The company which has doubled its stock price in the last eight quarters has suffered depreciation in the recent days along with other big tech companies. The stock split announcement, however, helped the company to see some spike in its share prices by 7% in extended trading according to news agency Reuters.

In two unrelated developments, the company has got a boost to its expansion and acquisition drive. The company is poised to win an antitrust motion in the EU for its $8.5 million purchase deal of US movie studio MGM. In a similar development, the Competition Commission of India has allowed the company to go ahead with the acquisition of a major B2B online marketplace Cloudtail’s parent company Prione Business Service Private limited.

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