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Amazon.com Inc. announced on Wednesday that its board of directors had approved a 20-for-1 AMZN stock split and a $10 billion buyback plan, sending its shares up 7% during extended trading.
As a result of this split, investors will receive 19 additional shares for every share they own. As announced on Wednesday, the split will be reflected in the accounts of shareholders by or about June 3. However, shares will not start trading until June 6. Shareholders must approve the agreement.
Amazon’s (AMZN) shares surged 7% on Wednesday on the stock market after the company announced the stock split. This is Amazon’s first stock split since 1999. Other tech giants, including Alphabet Inc (parent company of Google), Apple Inc, Tesla, and NVIDIA, have also announced stock splits. In the last month, Alphabet announced a 20-for-1 stock split.
“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 (AMZN) spokesperson said.
Additionally, the board of directors of Amazon (AMZN) authorized a $10 billion buyback plan, replacing the prior $5 billion plan authorized by the board in 2016, of which $2.12 billion in shares were repurchased. Amazon’s stock, which ended Wednesday at $2,785.58, has nearly doubled in value in the last two years as demand for both its e-commerce and cloud computing businesses has spiked following the COVID-19 outbreak. After falling about 16 percent in a tech rout this year, the company’s market capitalization is about $1.4 trillion as of today.
AMZN Stock Split
The stock split allows a company to divide each current share into many new shares without impacting the company’s market capitalization or each investor’s interest. Therefore, the share price falls. Generally, a stock split is a good sign for both current and prospective shareholders, as it makes the stocks more affordable for them. The new shareholders are also given the impression that they now own more shares than they did before the split.