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Amazon surges 16% ahead of stock split; what it means for investors, and who’s next?

Posted: 3 June 2022 10:42 am
News
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Amazon starts "stock-split summer" with a 20-for-1 split on Monday. Alphabet and Tesla are among those likely to follow.

Amazon (AMZN) is up 16% in US markets this week leading into a 20-1 stock split on Monday that will lower the per share price to about US$125. It's the first of several companies expected to make the move this summer, including two other of the market's biggest stocks.

Investors often reward stock splits, which give the illusion that shares are less expensive. They don't, however, change the fundamental value.

If the move inspires more investors to buy, though, the higher demand could mean an overall gain for Amazon investors.

What investors get with the stock split

On Monday, investors who own Amazon shares will get 20 shares for each one they own, but with a lower price for each. This means that if an Amazon share costs US$2,500 pre-split, on Monday each Amazon share will be worth US$125 – US$2,500 total for 20 shares.

Shares closed at US$2,510.22 on Thursday.

In theory this shouldn't matter much. Amazon's market cap doesn't change with the stock split, and fundamentals like the price/earnings ratio – often used to decide whether a stock is cheap or expensive – don't change.

And with fractional shares available as low as US$1 through multiple brokers, few investors are pricest out of even the high-price stocks.

Despite that, stock splits tend to positively affect the share price going forward.

Big names are likely to follow

Amazon isn't the only big market player expected to make this move in what some are dubbing a stock-split summer.

Alphabet (GOOGL) declared a 20-for-1 split set to take effect in July. Other potential stock-split companies with high share prices include Booking.com (BKNG), Alleghany (Y), BlackRock (BLK), Equinix (EQIX), Broadcom (AVGO), Adobe (ADBE) and Intuit (INTU).

And then there's giant Tesla (TSLA), which said in March it would ask shareholders for permission to split the stock. The next shareholder meeting is in August, but there's no official timeline for the split.

Learn how to buy Amazon shares before the stock split.

Ready to open an account or considering a new broker? Find the best online brokers for your needs. Or check out fees and features in our comparison table to find a better deal today.

Kliment Dukovski doesn't own shares of the aforementioned companies as of the publishing date.

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