Amazon Board Approves 20-For-1 Stock Split, $10 Billion Buyback

Amazon's board has approved the company's first stock split in more than two decades. GeekWire reports: Subject to shareholder approval, the 20-for-1 split would revalue Amazon's individual shares, aiming to make them more affordable for individual investors, recognizing the long-term increase in the company's share price. The change will take effect in June if shareholders approve the split at the company's annual meeting in May. Amazon's board also authorized a buyback of up to $10 billion of its common stock. The new authorization replaces a prior $5 billion buyback plan, approved in 2016. Amazon bought back $2.12 billion of its shares under that prior plan.

The company has split its stock three times before, all of them in the late 1990s, prior to the dot-com bust: a 2-for-1 split in June 1998; a 3-for-1 split in January 1999; and a 2-for-1 split in September 1999. Amazon's share price has risen from $62.44 after the last split to close at $2,785.58 on Wednesday.

It is odd that companies still do this

[saloomy]

Considering most brokerages supper fractional share purchasing. Especially when you are dealing with millions of retail customers like Robinhood does.

Re:It is odd that companies still do this

[thegarbz]

The price doesn't dip on a stock split. It literally just divides and stays that way. Your post makes no sense, if it's going to go up it'll go up with or without the split.

Re:It is odd that companies still do this

[galabar]

In fact, the idea seems to be to make the stock available to more investors. So, Amazon is hoping for an increase, not a dip.

Re:

[Whateverthisis]

Adn they're going to trigger the rise with a buyback. So they do a stock split, then buy a bunch of their own shares. Currently at $2,800, one share then becomes 20 worth $140/share. They then remove a bunch of shares in a buy-back, which artificially raises the price of the new lesser shares, making it appear their stock is going up, so people buy the now more affordable shares, thus making the stock price actually go up.

Pretty smart actually.

Re: It is odd that companies still do this

[AcidFnTonic]

sssh, he has "figured it all out". Dont come ruin things with facts.

Re:

[dmomo]

If this were true the market would also buy the dip, basically factoring that into the price and smoothing it out. You and I have the same opportunity to buy that fictional dip. It would be a moronic reason for Amazon to split their shares.

Minutes vs months

[raymorris]

Yeah it's a little different opportunity.
For you and I it takes about five minutes to log in and buy. We have a delay of a couple minutes between the decision and the purchase.

When the company (the stockholders aka you and I collectively), does a buyback, it needs to be put to a vote of the stockholders first, so that takes a few months.

Re:

[misexistentialist]

robinhood gamblers prefer options, which aren't fractionalized

Re:

[bill_mcgonigle]

> robinhood gamblers prefer options, which aren't fractionalized

Option pricing isn't based on the stock price, it's how much in or out of the money it is, vs the risk.

Re:

[burtosis]

Option pricing isn't based on the stock price, it's how much in or out of the money it is, vs the risk.

They post the odds up in a wall like format, where you can place your bet and the odds continually change till you get your ticket. Someone bets too big and the odds drop hard to keep house advantage. And by they I mean horse betting. Sir, this is a casino, not some shady back alley brokerage.

Re:

[thegarbz]

Not odd at all, especially if you offer dividend reinvestment schemes it can become difficult to manage appropriately when your stock price is high.

Re:

[bill_mcgonigle]

The market is irrational.

If AMZN is $100 today and they split 20:1 it'll be $5. Then most people remember it was a $100 stock and it tends to head back towards the previous number, much faster than it would have gone from $100 to $2000 otherwise.

Does this make fiscal sense? Nope.

But for the company it's printing money. 20:1 is extremely aggressive and most companies can't get away with it, because the huge institutional investors know it's BS. Which always struck me as weird because all they have to do

Re:

[burtosis]

hold on tight and ride the wave of irrationality.

Truly the essence of today’s investing experience.

Re:

[timeOday]

It's funny because 25 years ago with the rise of the Internet we wondered if day traders would destabilize it, then 20 years ago it was robotraders... but instead we have a market that is super-resistant to corrections simply because there's nowhere else to put your retirement savings (except real estate, which is equally high).

Re:

[domovoi]

Stock buybacks are the most transparently ludicrous way companies puff up their own valuation. I honestly can't believe analysts take it as a serious measure of health; surely a company whose principal means of driving stock prices is essentially financial sleight of hand should be devalued by those who pay attention to such things.

Re:

[smoot123]

Stock buybacks are the most transparently ludicrous way companies puff up their own valuation.

More fundamentally, they're an alternative to dividends. Both let a company return profits to investors but a stock buyback is taxed as capital gains instead of regular income. In addition, a buyback lets investors decide whether they prefer to take the profit or leave it with the company. In other words, with a dividend, investors have no choice whether to accept the dividend and pay taxes; with a buyback, an investor gets to decide whether or not they want to sell and pay taxes.

Since the point of a compan

Re:

[kiviQr]

Difference is who owns fraction. You don't own the fraction of stock only full shares, fractions are owned by broker. Not a major loss per user if something happens to brokerage.

Oh noes!

[Bu11etmagnet]

Amazon has been taken over by the Judean People's Front.

Splitters!

on the backs of the delivery contractors

[doug141]

This says Amazon pays 10 cents per package delivered, maybe another 15 cents if bonus metrics are hit. Contractors are leaving the business hundreds of thousands in debt.
https://www.vice.com/en/articl... [vice.com]

Re:

[Entrope]

I am not entirely without sympathy... but what do these folks think their competitive advantage is? More delivery expertise than UPS? Better economies of scale than FedEx? More control over their workload or reimbursements than Amazon?

They entered into a monopsony where the buyer is an enormous company that is (and has been) infamous for cutting its own costs. And apparently they accepted contracts written by that company with few or no modifications. In effect, they did not own their own businesses --

Re:

[doug141]

What did they expect would happen?

This: "Amazon’s Delivery Service Partner program advertises on its website that its partners can expect to make up to $300,000 in annual profit with as little as $10,000 start-up investment."

Re:

[Entrope]

If a sucker is born every minute, how many times can you sell the same bridge?

If the argument is that they blindly accepted marketing materials as unvarnished and complete truth, my remaining sympathy dries right up.

Buybacks, Mergers, and Acquisitions

[fustakrakich]

That's what the Wall Street bailouts [wallstreetonparade.com] have given us for the last two and a half years

Sort of pre-empts the DOJ referral

[radicimo]

Intentional or not, this announcement certainly shifted the news cycle from today's Criminal Obstruction of Congress referral to the DOJ by House Judiciary Committee [nakedcapitalism.com] of Amazon.

TLDR, they lied to Congress and continue to obstruct, regarding house-brand data collection of third-party seller's data.