Amazon (AMZN) is about to drop by 95%!
Just kidding, but the price will fall about that much after the close tonight — the stock split they announced goes through today and will show up tomorrow in your account, if you own shares, so AMZN shareholders can expect to see 20X the number of shares in their account over the weekend… and each share will be worth roughly 1/20th as much as you remember.
That shouldn’t really mean anything, except to the few folks who want to use options trading strategies or who aren’t allowed to trade in fractional shares of stocks, but it’s psychologically important to a lot of people, and the stock market is nothing if not a daily check of investor emotions. Splits are usually good for stock prices in the short term, but, as we’ve noted before, that’s probably also because stocks that split tend to do so after a long period of very strong performance… and momentum is a powerful driver for stock prices in the short term, too, so it’s hard to know whether it’s continuing momentum or investor enthusiasm for a split that matters more. We can’t promise that AMZN will go up, obviously, just that, on average, stocks beat the market by a little bit for the year or so after a stock split is announced.
Among the mega-caps that are splitting right now, in case you’re curious, I’d pick Alphabet (GOOG) over Amazon. Alphabet is more meaningfully undervalued here and has a less fragile business in the short term, given Amazon’s overbuilding during COVID, but I have fairly large positions in both and would be happy to own more of either at the right price, and Amazon is also still relatively appealing. (Alphabet is also doing a 20-for-1 stock split, approved at the annual meeting a couple days ago, but it won’t happen for another month or so — looks like the official switch will happen after the close on July 15).
And yes, in case you’re really into the splits, Shopify (SHOP) is still planning a stock split as well — their 10-for-1 stock split, which was announced a couple months ago (in combination with the sneaky “founder share” they want to give to Tobi Lutke), will likely be approved when shareholders vote on June 22, and go through around the end of the month.
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