As a small business consultant who works with entrepreneurs across industries, I‘ve fielded plenty of questions recently about Amazon‘s 20-for-1 stock split that took effect June 6, 2022. My clients often invest in individual stocks to build personal wealth, so accessible shares of prominent companies like Amazon are attractive.
Below I‘ll analyze this split from the lens of a business owner, shedding light on why Amazon likely chose to split its stock, how it opens doors for small investors, and what it signals about Amazon‘s growth trajectory.
Why Companies Split Stocks
Before diving into Amazon‘s specific motivations, let‘s review why stock splits happen in general:
- Attract small investors – A $2,700+ share price is out of reach for most individual investors. Splits make ownership achievable.
- Increase liquidity – More affordable shares tend to change hands more freely and frequently, increasing trading activity.
- Signal growth confidence – Companies typically only split stocks when they foresee gains continuing over the long term.
So in summary, splits indicate a bright future and make shares available to more individual shareholders.
The Implications for Amazon Investors
Given Amazon‘s stock rose dramatically for years before its first split in over two decades, this move carries significant weight. It conveys Amazon‘s board sees ample room for expansion still ahead.
While total value of existing share holdings is unchanged, the split makes Amazon shares reachable for regular investors in my network. For context, Amazon climbed from around $3,500 per share pre-split to about $130 now.
That sub-$150 price tag now allows business owners to buy fractions of shares, establishing diverse portfolios. Increased liquidity also makes trading easier for small-time investors.
What This Signals for Amazon‘s Business
Amazon‘s confidence enough to split now after 20-plus years also suggests strong performance on the horizon. The company has ventured into grocery, healthcare, self-driving vehicles, and more lately.
Revenue still comes predominantly from e-commerce and cloud computing. But new divisions could supplement growth in the years ahead. This comes as music streaming, smart home devices, and other well-known segments thrive too.
My clients supplying or seeking to supply any part of Amazon can find encouragement in this outlook. Just as my investing clients gain easier access to ownership.
While past performance never guarantees future results, Amazon‘s split hints at a bright road ahead. I‘ll be following closely and helping clients capitalize anywhere possible!
