Amazon’s stock split ‘makes change’ but could boost investment interest

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Amazon’s stock price looks different today as the stock split takes effect. Amazon’s board of directors approved the 20-for-1 stock split announced in March at the 2022 annual meeting of shareholders on May 25. The split will likely allow more investors to afford to invest in Amazon and will likely expand the company’s audience and reach.

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The stock closed at $2,387 on June 3, started trading around $120 on June 6, and was up 0.7% in premarket trading.

According to Kiplinger, markets love splits because they offer investors more flexibility, while having no impact on a company’s fundamentals or valuation.

“That’s because a split is essentially the same as making change. In this case, shareholders will effectively exchange one $20 bill for 20 $1 bills,” reported Dan Burrows of Kiplinger.

Additionally, Barron’s reports that another possible boost for the stock is that the stock split makes the company a candidate for inclusion in the Dow Jones Industrial Average (DJIA), as the DJIA weights components in price function.

“A high-priced stock moves the index more than a low-priced stock, and a four-digit stock would exert an outsized influence on the index. But that change won’t happen quickly. The latest change to a Dow component dates back to 2020, when Amgen, Honeywell and Salesforce replaced Exxon Mobil, Pfizer and Raytheon,” Barron reported.

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Amazon is among a slew of companies that have recently announced stock splits. Shopify announced one in April, and stock meme darling GameStop announced on March 31 that it would seek shareholder approval for a stock split at the upcoming 2022 annual meeting, according to a Securities filing. and Exchange Commission (SEC).

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Other companies that made similar announcements included Tesla in late March, and Amazon and Alphabet, which announced a 20-for-1 stock split in March and February, respectively.

About the Author

Yael Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She has also worked as a VP/Senior Content Writer for major New York-based financial firms, including New York Life and MSCI. Yael is now independent and most recently co-authored the book “Blockchain for Medical Research: Accelerating Trust in Healthcare”, with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in journalism from New York University and one in Russian studies from Toulouse-Jean Jaurès University, France.

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