Amazon shares are going to be available 20 times cheaper.
The company announced Wednesday that its board has approved a 20-for-1 stock split, its first split since 1999. If approved by shareholders in May, the split will take effect June 6.
Amazon closed Wednesday at $2,785 per share. If there was a stock split today, Amazon's stock price would be $139 per share.
Don't worry, Amazon stockholders (which is pretty much everyone with a retirement account these days) — your bets will still be worth the same. When all is said and done you will have 20x more shares.
Companies split their shares for several reasons: Splits can put their stock within reach of smaller, individual investors. This helps companies gain liquidity and the split can create more demand for the company's stock.
Although institutional investors with deep pockets may not care about the overall stock price of the company, individual investors may be put off by higher priced stocks. The growth of zero-fee trading apps, including Robinhood, E-Trade, and others, has made stock splits more important in recent years.
Amazon's move may also be aimed at subsuming it into the famous Dow Jones Industrial Average, which includes less expensive stocks. For example, Apple (AAPL) announced a 7-for-1 stock split in 2014 and joined the Dow in 2015. Amazon's divestiture is no guarantee it will be included in the Dow, but the index is wanted by the world's most valuable retailer, which is also a major cloud provider and media giant.
"This divestiture will give our employees more flexibility in managing their equity in Amazon and making the share price more accessible to those looking to invest in the company," Amazon said in a statement.
If potential shareholders weren't convinced, the company offered another incentive to buy: a repurchase program for $10 billion of its stock. This can help increase the value of a company's shares by effectively pulling the stock's supply from the market.
Shares of Amazon (AMZN) rose 8% in extended trading.
Major company stock splits have become very prevalent in recent years. Apple and Tesla announced a split in 2020. But one company with a dangerously high stock price never split and said it never would: Berkshire Hathaway (BRKA).
At $488,245 per share, Berkshire's shares are unaffordable to most individual investors. That's why it offers its B-class shares, which have been split in the past, for $325.