Amazon. AMZN 2.40% com Inc. On Wednesday, the board of directors approved a 20-to-1 stock split and allowed the e-commerce giant to buy back up to $10 billion of the company’s common stock.
An Amazon spokeswoman said the split would make the split-adjusted share price more accessible to potential investors and give employees more flexibility in how they manage stock-based compensation.
The share split and the permitted share increase are subject to shareholder approval at the annual shareholder meeting scheduled for May 25th.
Amazon shares rose 6.5% after hours following the news. Shares closed on Wednesday at $2,785.58, up 2.4%. By Wednesday’s close, shares were down 9% over the past 12 months.
The company’s shares have lagged other tech stocks in recent months as the pandemic-driven surge in online shopping slowed and Amazon faced increased competition in its cloud computing business. However, the company’s profits almost doubled last year due to significant earnings from investments in the electric vehicle maker.
Amazon and other tech companies have adjusted their pay methods in an effort to retain the best employees in high-demand fields like software development and other corporate positions.
In February, the company more than doubled the maximum base wage it pays to corporate workers, raising the amount to $350,000 a year from $160,000 previously.
“Last year the labor market was particularly competitive and after a thorough analysis of various options, weighing the economics of our business and the need to remain competitive in order to attract and retain the best talent, we have decided to significantly increase our compensation,” reads a memo sent to workers in last month.
Amazon has split its stock several times in the past, but hasn’t done so since 1999, when the company’s net sales were $1.6 billion. Last year, the company’s net sales were $469 billion and the market value was more than 100 times what it was in early 1999.
Amazon shareholders registered as of May 27 will receive 19 additional shares per share in June. Trading is expected to start on a split-adjusted basis on June 6.
Stock splits help attract investors who might be deterred by a high share price.
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This practice made a slight comeback during the Covid-19 pandemic as Apple Inc. AAPL 3.50%, Tesla Inc. TSLA 4.19% and Google’s parent company Alphabet Inc. GOOG 5.18% revived it to make their shares more accessible to individuals. investors. Many of these companies saw significant increases in their share price during the Covid-19 pandemic as much of the world turned to technology to manage lockdowns and work from home or entertainment.
Alphabet held a 20-for-1 share split in February. Alphabet shareholders as of July 1 will receive 19 additional shares on July 15 for each share they own. Trading will begin on a split-adjusted basis on July 18. In 2020, Apple also carried out a 4-for-1 stock split.
Amazon’s newly approved buyback authorization replaces a previous $5 billion share buyback authorization approved in 2016. Under this authorization, the company bought back $2.12 billion worth of shares. The company did not buy back shares in 2019, 2020, or 2021, but did buy back 500,000 shares worth $1.3 billion between January 1 and February 2, 2022, according to its annual securities filing. Amazon does not pay dividends.
Write to Denny Jacob at [email protected]
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