In March this year, Amazon announced its stock split for the first time since 1999 and the 20-1-stock split is still effective today. At the time of this announcement, the shares were valued at $2785, and this was a gain of over 4,500% since the first split in 1999.
Investors in the market love stock split primarily because they provide you with the illusion of getting something over nothing. However, financial analysts caution traders with the example that cutting one pizza into 20 slices does not indicate you will get more pizza!
Kavan Choksi Singapore on the Amazon 20-1 stock split
Kavan Choksi Singapore is an esteemed business and finance expert with a passion for fine arts across the globe. When it comes to the stock split of Amazon, he says that the company approved it on the 9th of March. The goal of the split was to make the shares of Amazon more accessible to people interested in investing in the shares of the company. The company’s board of directors announced that the split would give their employees greater flexibility in how they control their equity in the company.
The meaning of a stock split
When a company decides to split its stock in the market, this means that it divides each share into several new shares. In the 20-1-stock split, every share of Amazon would be split into twenty new shares. Each of these shares would be worth one-twentieth of the original value of the share.
The trader should note that a stock split does not influence the company’s market capitalization, that is, the combined value of all the shares. At the same time, it does not change the value of every investor’s stake in the company. It just increases the number of outstanding shares that are available for offering in the stock market. In the process, the costs of the share become lower, and they become more accessible to investors.
The reason why Amazon is splitting its share
If a company splits its stock in the market, it is a sign that it is profitable and thriving. With Amazon, the above is surely evident as it has grown exponentially over the last few years. In the company’s annual report released in 2021, Amazon reported revenue earnings of $470 billion, which was almost up to 22% year-over-year. The company’s net profit was $33.4 billion, which again was a gain of over 56% more than the previous year.
Wrapping up
Kavan Choksi Singapore says that when the company is thriving, and it has recently announced a stock split, its shares’ prices have reduced, which is great news for traders. However, when it comes to investing in the company and buying stocks, do not follow any mad rush. You must be financially educated on how the stock markets operate. Keeping track of global events and events that impact it helps you make informed choices and not suffer losses.
