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Amazon announces 20-for-1 stock split, $10 billion buyback

Amazon announces 20-for-1 stock split,  billion buyback
KEY POINTS
  • Amazon on Wednesday said its board of directors has approved a 20-for-1 stock split.
  • It’s the first split since 1999 and the fourth since Amazon’s IPO in 1997.
  • The company also said its board has authorized Amazon to buy back up to $10 billion worth of shares.

Amazon announced its first stock split since the dot-com boom, telling investors on Wednesday that they’ll receive 20 shares for each share they currently own. The stock soared 6% in extended trading.

The company also said the board authorized it to buy back up to $10 billion worth of shares.

Stock splits are cosmetic and do not fundamentally change anything about the company, other than possibly making the shares accessible to a larger number of investors because of their cheaper price.

Were the split to happen as of Wednesday’s close, the cost of each share would go from $2,785.58 to $139.28, and each existing holder would get 19 additional shares for every one they own.

Amazon is the latest highly valued tech company to pull down the price of each share through a split. Google parent Alphabet announced a 20-for-1 split in February. In mid-2020, Apple disclosed plans for a 4-for-1 split, and Tesla told investors it was instituting a 5-for-1 split.

Andy Jassy, Amazon’s CEO, has faced a rough start to his tenure, which began in July. The stock was the worst performer among Big Tech companies last year and has dropped 16% so far in 2022, joining a decline across the sector. Amazon just reported its slowest rate of growth for any quarter since 2001 and, according to a recent Wall Street Journal report, billionaire activist investor Dan Loeb, who’s been adding to his Amazon holdings, told investors on a private call that he sees about $1 trillion in untapped value at the company.

Amazon, which has recently made adjustments to its compensation strategy, said the latest change is targeted at helping corporate staffers.

“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,” an Amazon spokesperson said in a statement.

Last month, Amazon boosted its maximum base salary for corporate workers to $350,000, up from $160,000, as it contends with an increasingly competitive labor market. Historically, Amazon has relied on generous stock awards to attract talent, but the shares underperformed in 2021, and employees have pressured the company to make changes.

Amazon Shares Since Last Split In 1999
Amazon shares since last split in 1999

Distributions from the stock split will be made to Amazon shareholders at the close of business on June 3, and trading will begin on a split-adjusted basis on June 6.

This is Amazon’s fourth stock split since its IPO in 1997, and its first since 1999, when the company was a fraction of its current size. It also split on a 2-for-1 basis on June 2, 1998; a 3-for-1 basis on Jan. 5, 1999; and a 2-for-1 basis on Sept. 2, 1999.

Amazon shares are up more than 4,300% since the last split was announced.

This article was originally published on CNBC by Annie Palmer

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