Simone Del Rosario Business Correspondent

Why Amazon stock is the cheapest it’s been in more than a decade

Jun 06, 2022

Simone Del Rosario Business Correspondent

By Simone Del Rosario (Business Correspondent), Emma Stoltzfus (Video Editor)

Amazon’s stock got a lot more affordable Monday after a 20-1 stock split sent shares to their lowest price since 2010. It’s the first time the trillion-dollar company has split shares this millennium.

In turning one share into 20, the price of a share went from $2,447 to $122.35, but buzz over the split had the new, lower price surging several percentage points in the first couple of hours of trading Monday.

A stock split doesn’t change the value of a company, as it’s basically the equivalent of trading a $20 bill for 20 $1 bills.

Why companies split shares

One reason companies like Amazon split shares is to give more investors entry access into one of the biggest companies in the world. An individual investor may not have more than $2,000 to invest in a single share of Amazon but may be willing to invest a little more than $100, which is all it costs now. It also allows active investors to increase exposure to the company at a fraction of the price.

In addition to being more appealing to individual investors, the move can also be very lucrative for the company. According to Bank of America research, S&P 500 companies that split shares return 25% on average over the next 12 months, compared with a 9% average annual index return.

Who’s next?

Amazon is not the only major company looking to entice new investors with a lower share price. Shareholders of Alphabet, Google’s parent company, just authorized a 20-1 stock split July 15, while Tesla shareholders are set to vote on whether to split shares later this summer.

SIMONE DEL ROSARIO: AMAZON STOCK JUST GOT A LOT MORE AFFORDABLE. IN FACT, WE HAVEN’T SEEN A SHARE PRICE THIS LOW SINCE 2010.

BUT IT DOESN’T MEAN THE COMPANY’S ANY CHEAPER.

ON MONDAY AMAZON STOCK SPLIT FOR THE FIRST TIME THIS MILLENNIUM, TURNING ONE SHARE – INTO 20.

IT MADE THE PRICE GO FROM A LESS ATTAINABLE 2,447 DOLLARS – TO 122 AND CHANGE.

WITH A STOCK SPLIT LIKE THIS – IT’S REALLY THE EQUIVALENT OF TRADING A 20-DOLLAR BILL FOR 20 ONE-DOLLAR BILLS.

SO WHY DO IT?

SIMPLE. IT GIVES MORE INVESTORS ENTRY ACCESS INTO ONE OF THE BIGGEST COMPANIES IN THE WORLD. YOU MAY NOT HAVE HAD OVER TWO GRAND TO INVEST IN A SHARE OF AMAZON BEFORE, BUT YOU MIGHT HAVE OVER A HUNDRED BUCKS, WHICH IS NOW ALL IT TAKES.

AND THAT CAN BE VERY LUCRATIVE FOR THE COMPANY. ACCORDING TO BANK OF AMERICA RESEARCH, S&P 500 COMPANIES THAT SPLIT SHARES RETURN 25% ON AVERAGE OVER THE NEXT 12 MONTHS, COMPARED WITH A 9% AVERAGE INDEX RETURN.

AMAZON’S NOT THE ONLY ONE LOOKING TO ENTICE NEW INVESTORS WITH A LOWER SHARE PRICE.

GOOGLE OWNER ALPHABET IS SPLITTING NEXT MONTH AND TESLA PLANS TO VOTE ON A SPLIT LATER THIS SUMMER.

IN NEW YORK FOR JUST BUSINESS I’M SIMONE DEL ROSARIO.