Back on March 9, 2022, Amazon approved a 20-1 stock split that would go into effect at the close of trading on June 3, 2022. When that day arrived, the price of a share got down to around $100, which made individual shares far more affordable than before the split. However, does that mean the move worked out for investors? If you’re asking questions like that, here’s what you need to know.
Why Amazon Split Its Stock
When the board discussed the Amazon stock split, they specifically mentioned affordability as part of the equation. Before the split, Amazon stock felt inaccessible to smaller investors who could shell over nearly $2,500 for a single piece of the Amazon pie. After the split, that was no longer the case.
Additionally, the board mentioned that the split would allow employees with equity to manage that financial asset more effectively. Again, the move made Amazon stock less cumbersome.
However, while some of the sentiments are seemly altruistic, there are other reasons why a stock split is considered by companies with high stock prices. Increased accessibility may spur buying activity. If that happens, values go up, and that’s good for the underlying company. Further, lower individual share prices can give the business more financial agility, which is also viewed as a boon.
How the Amazon Split Is Working Out
Before the stock split, Amazon share prices sat near $2,450. Since it was a 20-1 split, that would equate to a value of about $122.50 per post-split share.
Since the split, Amazon stock prices have slightly declined. As of July 7, 2022, a share was sitting just below $117. Overall, the difference isn’t massive, but it’s likely large enough to have an impact on long-time investors’ portfolios.
Does the decline in price mean the split was a bad move? No, it doesn’t. It’s critical to remember that the country is currently in a period of high inflation, an economic situation that’s largely pulled the values of stocks down. As a retailer, Amazon is caught up in that wave, and not necessarily because the company is unsound in any way, shape, or form.
Inflation Concerns
Since inflation is marring the investment landscape – particularly as fears grow that a recession may be on the horizon – you can’t use existing stock prices to determine if the split will treat investors well in the end. Instead, this is an assessment that shouldn’t come until economic conditions stabilize and investing activities normalize, as there’s a good chance Amazon will do more than simply bounce back but experience notable gains as time goes on.
Were you invested in Amazon before the split? If so, do you think that the Amazon split is working out well for investors like yourself or not? Do you think the split was a good or bad move overall? Share your thoughts in the comments below.
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