E-commerce giant follows peers with stock split and $10bn buyback to boost share price
10 March 2022 - 20:32
byNivedita Balu and Medha Singh
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An Amazon Books retail store in New York, the US, February 14 2019. Picture: BRENDAN MCDERMID/ REUTERS
Amazon.com shares jumped over 5% on Thursday after the e-commerce giant’s share split and buyback moves stand to draw more investors to a stock that has been lacklustre this year.
The company late on Wednesday announced a 20-for-1 stock split, its first since 1999, and a $10bn share buyback. It comes on the heels of a similar split announced by Alphabet earlier this year.
“Amazon's management is looking to instil fresh confidence,” AJ Bell Investment director Russ Mould said, adding that the buyback was the company’s first direct distributions of cash back to its shareholders since its stock market debut.
Amazon shares were up 5.4% to $2,936.99 in early trading on Thursday. The company’s stock closed at $2,785.58 on Wednesday, near a two-year low after riding a pandemic-induced rally in tech and growth shares that brought it within striking distance of a $2-trillion valuation mark.
Amazon’s stock ticker was trending on investor-focused social media site stocktwits.com and was among the most discussed on Reddit’s wallstreetbets, according to sentiment aggregator Swaggystocks.
Shares of Apple and Tesla rallied sharply after their stock splits in 2020.
Amazon’s stock split “just makes inexperienced investors and traders feel better”, said Perri Dong, a China-based portfolio manager at Redwood Winslow, who said he owns Amazon shares.
“It’s just psychological. Some people believe the shares will have more liquidity, but I argue it doesn’t matter.”
Amazon shares have struggled along with other growth stocks in 2022, falling 16.5% year-to-date as of Wednesday’s close.
“To state the obvious, buybacks also suggest Amazon sees value in the stock here,” BofA Global Research analysts said in a note, adding that the repurchases would amount to about 0.7% of shares outstanding.
The company went public in 1997 at an IPO price of $18, or $1.50 when adjusted for stock splits that occurred in 1998 and 1999. The latest stock split will take effect on June 6.
Amazon’s share surge on Thursday was a bright spot in an otherwise gloomy market, where shares of megacap companies such as Apple and Microsoft were trading lower.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Amazon jumps on 20-1 stock split and buyback plan
E-commerce giant follows peers with stock split and $10bn buyback to boost share price
Amazon.com shares jumped over 5% on Thursday after the e-commerce giant’s share split and buyback moves stand to draw more investors to a stock that has been lacklustre this year.
The company late on Wednesday announced a 20-for-1 stock split, its first since 1999, and a $10bn share buyback. It comes on the heels of a similar split announced by Alphabet earlier this year.
“Amazon's management is looking to instil fresh confidence,” AJ Bell Investment director Russ Mould said, adding that the buyback was the company’s first direct distributions of cash back to its shareholders since its stock market debut.
Amazon shares were up 5.4% to $2,936.99 in early trading on Thursday. The company’s stock closed at $2,785.58 on Wednesday, near a two-year low after riding a pandemic-induced rally in tech and growth shares that brought it within striking distance of a $2-trillion valuation mark.
Amazon’s stock ticker was trending on investor-focused social media site stocktwits.com and was among the most discussed on Reddit’s wallstreetbets, according to sentiment aggregator Swaggystocks.
Shares of Apple and Tesla rallied sharply after their stock splits in 2020.
Amazon’s stock split “just makes inexperienced investors and traders feel better”, said Perri Dong, a China-based portfolio manager at Redwood Winslow, who said he owns Amazon shares.
“It’s just psychological. Some people believe the shares will have more liquidity, but I argue it doesn’t matter.”
Amazon shares have struggled along with other growth stocks in 2022, falling 16.5% year-to-date as of Wednesday’s close.
“To state the obvious, buybacks also suggest Amazon sees value in the stock here,” BofA Global Research analysts said in a note, adding that the repurchases would amount to about 0.7% of shares outstanding.
The company went public in 1997 at an IPO price of $18, or $1.50 when adjusted for stock splits that occurred in 1998 and 1999. The latest stock split will take effect on June 6.
Amazon’s share surge on Thursday was a bright spot in an otherwise gloomy market, where shares of megacap companies such as Apple and Microsoft were trading lower.
Reuters
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