(BFM Bourse) – Valued at nearly $3,000 per share, Amazon is preparing to make its share more widely accessible by dividing its nominal value by 20. The e-commerce giant is following in the footsteps of other tech giants like Apple and Tesla or more recently Alphabet, which have already carried out or are considering a “split” to bring their share price to a more reasonable level, without penalizing existing shareholders.
After Apple and Tesla in 2020, it is Amazon’s turn to prepare a “stock split”, equivalent in French to a division of the nominal value of its share.
Amazon’s board of directors decided on Wednesday to split the stock by 20, which was worth $2,785.58 at the last close. At the height of its history, in November 2021, the title had even climbed to more than 3,700 dollars. The project will be submitted for shareholder approval at the annual general meeting on May 25.
In concrete terms, shareholders who hold a share on May 27 will receive, without having to do anything on their account a few days later, on June 3, 19 additional shares for each share held, the value of each share being automatically divided by twenty.
For future investors, this puts the title within reach of a greater number of people and makes it possible to split their orders more finely if necessary. Arithmetically neutral, a stock split is not a non-event, however: it is an indicator of strong stock market strength, although it should be noted that Amazon’s decision comes after a notable correction.
In itself, a stock split is therefore perceived as a bullish signal, which studies tend to confirm (see Ikenberry, Rankine and Stice, What do stock splits really signal? in the Journal of Financial and Quantitative Analysis). The positive reaction of the title Thursday seems to confirm it, since the course regains 4.79% to 2,931.07 dollars. In addition, Amazon announced in parallel that a budget of 10 billion dollars would be allocated to share buybacks, a way of mechanically improving earnings per share.
Guillaume Bayre – ©2022 BFM Bourse
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