Amazon Stock Split 2022: Should I Buy Amazon Stock Before Split?

In this article, we will understand all about the Amazon stock split, what it means and the schedule for the Amazon stock split 2022.

Amazon.com Inc. (AMZN), a leading company in e-commerce and cloud computing, is one of the world’s largest corporations. The company operates an online marketplace that sells everything from electronics to fashion to furniture to food to toys and much more.

It also provides music and video streaming services. Amazon’s cloud services platform allows businesses to create, deploy, and manage web applications for various purposes.

Amazon Stock Split
Photocredit: MARCA

Amazon began as an online bookstore when it was founded in 1994. However, Amazon’s founder and former CEO, Jeff Bezos, envisioned the firm as more than just an online retailer. On the other hand, Bezos saw Amazon as a technology business whose competitive edge was making online transactions easier for customers.

Amazon went public three years later, in May 1997, through an initial public offering (IPO). The Nasdaq Global Select Market is where its stock is traded.

Amazon has headquarters in Seattle, Washington, and Arlington, Virginia. Andy Jassy took over as CEO of the e-commerce powerhouse from Jeff Bezos in July 2021. Amazon is categorized as part of the consumer discretionary industry.

However, the firm has exploited its technological prowess to rapidly grow into new areas, such as cloud computing, where Amazon Web Services (AWS) is the major service provider. Walmart Inc. (WMT), e-commerce online auction site eBay Inc. (EBAY), and cloud computing services competitors Microsoft Corp. (MSFT) and Google Cloud parent Alphabet Inc. are among the company’s primary competitors (GOOGL).

In the fiscal year that concluded on December 31, 2021, Amazon earned $21.3 billion on net sales of $386.1 billion.

What Does Amazon Stock Split Mean?

Amazon’s board of directors approved a 20-for-1 stock split on March 9, 2022, as well as a stock repurchase of up to $10 billion in shares for an unspecified length of time. The split will need to be approved by shareholders at the annual shareholders meeting on May 25.

If authorized, the extra shares will be distributed on or about June 3, 2022, to all shareholders of record as of the close of business on May 27. If shareholders approve, which would be unusual if they don’t, this will be the first Amazon stock split since 1999 and only the company’s fourth since its initial public offering (IPO) in 1997.

This is part of a trend of super companies splitting their stock to make their shares more available to retail investors. In February 2022, Alphabet’s board voted to approve a 20-for-1 stock split, while Apple and Tesla announced stock splits in mid-2020.

The attorney general for the District of Colombia, Karl Racine, filed an amended antitrust suit against Amazon on September 13, 2021, focusing on the company’s ties with wholesale suppliers.

Should You Buy A Stock Before It Splits?

Of course, stock splits do not change the company’s value; they simply divide shares into smaller, more manageable chunks. However, they make it easier for smaller shareholders who do not have $3,000 to deposit to purchase the stock.

Although the introduction of brokerages that offer fractional shares has helped to alleviate this problem for small investors, many investors still have brokerage accounts that do not offer fractional shares. As a result, the Amazon stock split may affect a stock’s liquidity and options activity.

Some CEOs dislike the increased liquidity that a lower share price brings. Warren Buffett’s Berkshire Hathaway (BRK.A 2.14 % ) (BRK.B 2.16 % ) shares, which today sell for a staggering $488,245 per Class A share, have never been divided!

Buffett didn’t want to attract short-term traders seeking a fast profit, and more liquid, lower-priced stocks tend to make larger moves up and down due to increased trading activity.

In order to prevent the development of investment trusts that would allow smaller investors to own a “piece” of Berkshire for a charge, Berkshire was forced to offer lower-priced Class B shares in 1996.

Following the dot-com meltdown of the early 2000s, Jeff Bezos appears to have taken a page from Warren Buffett’s playbook, never dividing Amazon’s shares again after it crashed by more than 90%.

So, Why Is There An Amazon Stock Split Right Now?

Amazon’s stock has clearly performed strongly since the last split. However, as the stock’s price climbed above $3,000, it met a stumbling block, especially when contrasted to other high-profile tech stocks that had split in the last two years.

Could Amazon’s stock’s underperformance be due to a lack of liquidity? It’s difficult to say, but it’s plausible that employees (many of whom are paid in Amazon stock) are unhappy with the company’s recent performance. Since the outbreak began, Amazon has more than doubled its workforce and is in a global fight for tech talent, so a falling stock price could limit its capacity to acquire top programmers.

How Many Times Has Amazon Stock Split?

Amazon’s stock has been split three times, with a 20-for-1 split scheduled for June 3, 2022, subject to shareholder approval at its May 25, 2022 shareholder meeting.

The three times Amazon has split its shares include:

  • A 2-for-1 split of common shares took place on September 1, 1999.
  • A 3-for-1 split of common shares took place on January 5, 1999.
  • A 2-for-1 split of common shares took place on June 2, 1998.

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Don’t Purchase Amazon for the Split

While many people think of Amazon as an uncontrolled growth stock, investors should not overlook the company’s ability to allocate capital. Investors should buy the stock more than the stock split because it seems to be undervalued based on its components, and management appears to agree. Also, Amazon employs a lot of brilliant people.

The idea that Amazon is aggressively repurchasing shares is telling. Amazon tried to spend as much money as necessary on growth endeavors under Bezos; thus, the fact that management is increasing share repurchases indicates that it believes its stock is undervalued.

Since COVID-19, Amazon has gone through a major two-year investment cycle, but that should be slowing down now as growth trends settle. As a result, free cash flow should soar this year as Amazon reduces its spending on expanding its fulfillment network, which has more than doubled since the outbreak began.

Amazon has repurchased stock in the past, but only in tiny sums. The most recent repurchase occurred at the end of 2011 and the beginning of 2012 after the stock had dropped by almost 25%, and that’s about the same drop that stocks have taken recently. It would have been wise for investors to follow management at the time, as Amazon’s stock began to recover dramatically in late 2012 and beyond.

Amazon Upcoming Stock Split 2022 Date

According to the SEC filing, Amazon shareholders will vote on the Amazon stock split during the company’s annual meeting in May, and the split should take effect in early June, subject to the shareholders’ vote. If the stock rises due to the split, I hope management spends a significant chunk of the $10 billion share buyback before then.

After a disastrous year and a half, Amazon stockholders may be in for a much better year in 2022. With a stock split on the horizon, it’s a roaring buy.

What is your opinion on the Amazon Stock split scheduled for the middle of 2022? Share your views and ideas using the comment section.

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