Amazon has announced a 1:20 stock split and a share buyback of up to $10 billion to boost its share price amid high operating costs and employee retention concerns.
The split, which does not technically change the company’s fundamental value but often spurs investor optimism, is the fourth in the company’s 28-year history. Most recently in September 1999.
Amazon stock closed Wednesday at $2,785.58. The announcement prompted an after-hours jump of about 7 percent.
Trading on the new split-adjusted basis will begin on June 6 if approved by shareholders at Amazon’s annual meeting in May, according to a filing.
It follows similar movements of alphabet that announced a 20-to-1 split last month. In 2020, amid rising markets during the coronavirus, Apple and Tesla Each announced their own splits, 4-for-1 and 5-for-1 respectively.
“Big tech stars have all seen tremendous strength during the pandemic, and stocks are now ripe for a split,” said Dan Ives, analyst at Wedbush. “Amazon follows the example of Apple, Tesla and Alphabet in the stock split. These are smart moves as investors digest stock splits positively.”
Amazon’s value has grown more than 220 percent over the past five years, reaching a market cap of more than $1.4 trillion. But after the stock price received a massive boost early in the pandemic and households turned to the company in staggering numbers, the stock price has stalled as the true cost of keeping logistics running became clear.
Shares of the company are down 18 percent since the beginning of the year, compared to an 8 percent decline at Alphabet and 11 percent at Apple.
Amazon’s board of directors’ approval for a share buyback of $10 billion of the group’s common stock, of which $1.3 billion was purchased earlier this year, according to a filing, the company’s first purchase of its own stock since at least 2018.
“The stock split has no fundamental impact on the business,” said Brent Thill, an analyst at Jefferies. “But the repurchase will result in a lower share count and hopefully higher earnings per share.”
The move is the Seattle-based company’s latest attempt to offer additional incentives to its employees amid longstanding criticism that it pays less than its peers in the tech sector. Last month, Amazon told employees in a memo that it would increase base pay for its employees from $160,000 to $350,000.
Amazon said, “This split would give our employees more flexibility in managing their equity at Amazon and make the stock price more accessible to people looking to invest in the company.”
Amazon announces 20-for-1 stock split and $10bn share buyback Source link Amazon announces 20-for-1 stock split and $10bn share buyback