Finance
Amazon 20-1 Split Is Making Owning AMZN Stock Affordable
Amazon Stock Split
Tech Giant, Amazon, announced its first stock split on Wednesday, March 9, since the dot com boom in 1999. The Board of Directors of Amazon authorized the stock split 20-1 and $10 billion stock repurchase, soaring the company’s shares up more than 6% in extended training.
Amazon split 20-1, and a huge buyback could just be the boost, the company needs to break out extended share price weakness. Moreover, this stock split will give investors 20 additional shares for each share they currently own.
However, the distribution from the stock split takes place at the close of business on June 3, 2022. And trading based on the new share price is expected to start on June 6, 2022.
Wondering about the questions arising in your mind- why Amazon announced split 20-1 or how it will affect the shares price and value of the company? No worries. In this article, I’ll give you detailed information that will answer all of your queries. So read on to learn more. Let’s begin!
What do you need to know about Amazon 20-1 Split?
Amazon split its stock to make it more accessible to investors by lowering its trading price. However, the Amazon split is not set until the shareholders give the green light to it at the company’s Annual Meeting of Shareholders that will take place on May 25, 2022.
If it goes according to plan, investors will receive 20 shares for each share they hold. Each of the shares will be worth one-twentieth of the actual share price.
Likewise, if you have three shares of Amazon (AMZN) in your account, you will have 60 shares after the amazon split.
Furthermore, the stock splits are the financial equivalence of lowering the share price. It allows many investors to access a total share of Amazon because of its lower cost. The stock split does not change anything about the company’s value and doesn’t impact the company’s market capitalization.
If I talk about the 9th March close, the company’s share price did go from $2,785.58 to $139.28 after split 20-1. Instead, the company’s market value remained $1.42 trillion at that time.
Before it, the company’s share price had risen from $62.44 to close to $2,785.58 on Wednesday, since the last split.
Also, it doesn’t affect the value of any investor’s stake in the company. Moreover, the current share price of Amazon costs about $3,000. But if Amazon’s shareholders approved the split, it would pull down to $150 for each share.
Buyback of Amazon Shares-Largest Buyback in Amazon history
In addition to the announcement of Stock Split 20-1, the Board of Directors of Amazon announced the most significant $10 billion buybacks of the company’s common stocks.
This buyback of Amazon shares replaces the previous $5 billion stock repurchase authorization established in 2016, in which the company has bought back $2.12 billion of its common shares.
Additionally, the buyback program allows the company to buy back its shares from time to time. This step will increase long-term shareholder value.
However, the repurchase program does not have a selected expiration date. Although the tech company’s buyback was set up six years ago, the company did not start repurchasing stock until the current year.
Why is Amazon Splitting its Shares?
First and foremost, Amazon, the e-commerce tech giant, is a highly valued company. The split is a sign that a company is thriving and running a healthy business.
While the company is growing, its stock price has fallen around 22% this year. Splitting shares are associated with the stock market that has shown a significant pullback since the start of 2022, not with the company’s performance. Therefore, the aim of Amazon split 20-1 is to make Amazon’s share affordable for individual investors.
Amazon’s spokesperson said in a statement,
“This split will give our employees more flexibility in how they manage their equity in Amazon and make the share price more accessible for the people looking to invest in the company.”
In addition to this, the company said that the lower trading price of shares would help its corporate staffers who own the stock in the company. Amazon boosted the base salary of corporate employees from $160,000 to $350,000 last month.
There is another big reason for Amazon to split their shares: The possibility of adding the company’s shares to the Dow Jones Industrial Average (DJIA). DJIA is a price-weighted index due to which adding high price shares to it is challenging.
DJIA has some of the leading companies in the U.S stock market. But they do not want a high-priced index because it would give the company the heaviest weight in the index. Due to this, Amazon and Alphabet are not included in the index.
But the split-adjusted price would change it as Amazon is already the most prominent company by market capitalization. As a result, Amazon will be in the center of the shares price of present DJIA components.
Amazon Stock Gains popularity
Amazon is one of the highly valued tech giants to lower the share price by its 20-1 stock split. Many other prominent names approve the split to pull down the stock prices. Google’s parent company, Alphabet (GOOG), announced a 20-for-1 split in February, which takes effect on July 15.
Moreover, iPhone maker, Apple, disclosed a four-for-one split in mid-2020, and Tesla (Electric Vehicle maker) told investors about its plan to announce a 5-for-1 split.
Over the previous two years, Amazon stock has doubled due to its highly demanded e-commerce and cloud computing business raised in the pandemic. However, before this stock split, Amazon split stocks three times: a 2-for-1 stock split in June 1998, a 3-for-1 stock split in January 1999, and a 2-for-1 split in September 1999.
The Bottom Line
Amazon’s much-anticipated stock split of 20-1 takes place this year in June. Moreover, its stock is listed on the Nasdaq stock exchange. If it gets approved by shareholders, the Amazon 20-to-1 stock split will reduce the tech giant’s high share price.
Based on history, splits are positive events for the companies. The split will lower the share price, which will allow more people to invest in the company.
Do you want to share something related to the Amazon split or buyback? Feel free to share your thoughts and views via the comment section below. I’d love to know your ideas and views. Also, keep visiting the website to get more recent updates related to finance, stocks and cryptocurrency and much more!
Read: Amazon Acquires MGM Movie Studio In $8.5B Deal
American Entrepreneur and Journalist. Frank Nez is the CEO of Nez Media Company and Founder of advertising agency Easy Marketing Concepts.
GameStop’s short interest has been rising ever since its share price declined from its all-time high of $347.51.
GME’s short interest plummeted after shares rose early last year from the ‘meme stock’ frenzy.
While GME shareholders might have been able to scare of some short sellers, they’re back.
And they’re at high risk because GME shareholders continue to buy and hold the stock.
Is another GameStop short squeeze underway?
Let’s discuss it!
GameStop short interest
GameStop’s reported short interest is currently 24.23%.
This information is taken straight from Ortex – though many GME shareholders suspect the short interest is significantly higher.
This is mainly because the short interest is ‘self-reported’ by institutions.
And as you can tell, there is very little trust factor.
Ortex is a great source, nonetheless.
Mainstream media tried to kill the short squeeze thesis by saying GameStop had already squeezed and there was no more short interest.
However, GameStop’s high short interest only proves there are many short sellers who have yet to close their short positions.
GameStop’s short interest is equivalent to approximately 21.45 million shares on loan.
That’s the number of shares that have been borrowed but have yet to be returned to the lender.
Returning these shares back would require short sellers to buy back real shares, resulting massive volume and price runup.
Recent news and catalyst
Shareholders are especially excited about GameStop’s upcoming dividend.
See, in order for these lenders to receive the dividend, they will need the stock.
If millions of shares are out on loan, lenders could force borrowers to return them and claim that dividend.
As short sellers pile up to return these shares, the possibility of a short squeeze is highly probable.
But wait, there’s more.
Gabe Plotkin’s Melvin Capital is shutting down in June.
The hedge fund is notoriously known for being short on GameStop, resulting in its downfall.
Melvin Capital took a 50% loss in 2021 alone betting against ‘meme stocks’.
The short seller lost a staggering 20.6% in the first quarter of 2022 before ultimately throwing in the towel.
Gabe Plotkin told CNBC they are shutting down towards the end of June and plan to start a new company.
The hedge fund will be liquidating their assets to pay back their investors.
Any GameStop positions that were still open will need to be closed.
Are big price moves underway?
There’s no doubt GameStop will see a runup as short positions get closed.
Whether GME stock surges due to Melvin Capital closing or due to the stock dividend, a runup seems inevitable.
One thing is certain, though.
GameStop’s short interest tells us shorts have not left – but neither have retail investors.
Is it possible GME stock will reach a new all-time high soon?
What do you think?
Leave your thoughts in the comment section below.
You can follow Nez Media on Twitter @NezMediaCompany.
Research has surfaced that 98% of tickers had fewer FTDs than GameStop (GME).
GameStop has been the victim of short sellers for over a year now since it ran up to $347 per share in January of 2021 when it squeezed shorts from their positions.
The game retailer continues to be heavily shorted today with a 22.90% reported short interest (updated daily on FrankNez – source, ORTEX).
Keep reading to take a look at the GameStop’s FTD data.
GameStop failure-to-delivers unveil market weakness
Warren Buffett said the stock market is a device used to transfer wealth from the impatient to the patient.
And it’s true.
But he never mentioned how the cards are stacked against retail from the beginning.
GameStop’s FTDs unveiled market weaknesses and lack of proper regulation in the system.
Gary Gensler admitted earlier this year 90%-95% of retail orders are not processed through the lit exchange – but rather through dark pools.
Naked short selling has become a serious problem in the market, but especially in GME’s story because of the blatant market manipulation the retail community has seen.
FTDs for GameStop have been at an all-time high as market makers fail to meet their obligation to buyers.
GameStop is experiencing anywhere between thousands to tens of thousands and even hundreds of thousands of failure-to-delivers daily.
We tend to see FTDs in the market when there are not enough shares available to meet buyers demand.
So, while retail investors might not get their orders filled, short sellers are allowed to borrow an unlimited supply of stock to short the company.
What’s alarming is synthetic shares are being created to sell GME stock when there are no available shares to borrow.
This results in plunging share prices with no way for retail investors to fight back.
FTDs in GameStop are greater than majority of tickers in the market
GameStop has seen a massive surge in FTDs ever since the ticker became popular on r/wallstreetbets.
Although retail investors have exposed injustices in the market, the SEC and other regulators have failed to solve major problems in the system.
The chart above shows the total count of symbols with FTDs in the past 24 days.
98% of symbols had less FTD days than GME did.
AMC stock came close with 22 days of FTDs in a row where 95% of symbols had less FTD days than the movie theatre chain did.
AMC Entertainment has been another popular ‘meme stock’ with a high short interest and fails-to-deliver count.
The information provided by the community merely proves the retail has always been right.
And although nothing has been done about the blatant manipulation, shareholders know a short squeeze is inevitable.
You can follow Nez Media on Twitter @NezMediaCompany.
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