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Amazon just announced massive news for investors
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Their board of directors has just approved a 20-for-one stock split as well as a $10 billion stock buyback
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Now, the split itself won't actually happen for some time, not actually taking effect until close a business on May 27th
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But as expected, the market reacted very positively to this news, with Amazon moving up over 6.5% in the after hours
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This leaves Amazon stock sitting just shy at $3,000 per share, although this is still well below its 52-week high of about 30
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800 bucks. Now, as I just mentioned, this is a 20-for-one stock split. Investors will receive 20 shares
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for every one share that they held prior to the split. So, for example, if you had 10 shares
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prior to the split and actually hold through the split, you would then be left with 200 shares
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once the actual split takes place. For those of you watching out there who are completely
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unfamiliar with what a stock split is, it's when the company decides to increase the number of
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outstanding shares by issuing more stock to current shareholders. This in turn then decreases the share
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value proportionally to the split. So, for example, in the case that you actually held one share
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of Amazon worth $3,000 a share, once the actual split takes place, you would then hold 20 shares of
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Amazon now valued at a share So overall the value of your position does not change Your overall position is still worth But instead of having one share worth now you got 20 shares worth
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worth $150 each, but still overall it's a $3,000 position. Basically, the bottom line is that this
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has no real impact on the actual valuation of a company. A company doesn't magically become
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intrinsically worth more just because of a stock split. However, the market does look on these forward
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splits more favorably as it does make the shares more affordable to smaller investors and create
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more liquidity on the underlying stock. I think we could also expect the option markets in Amazon
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to get far more active as smaller investors can now actually participate. Now if you want to go out there
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and buy an Amazon contract, you don't have to spend thousands of dollars and go crazy far out of the money
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if you want to trade an option. Now, there's still no exact news as to what will actually happen
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to the option contracts. They could all go non-standard or possibly just split themselves
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which would make the most sense. But that'll be announced official. later down the line before the actual stock split. But definitely keep an eye out on this one
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We'll see how it ends up working out for Amazon in the long run run. The past two splits for
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Apple and Tesla recently led to massive runups for both. But with the turmoil on the markets lately
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we'll see how this actually pans out for Amazon. Definitely let me know down below what you guys
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think about this news and how you guys think it's going to impact the stock price for Amazon
