After today's market, $Amazon (AMZN.US)$The first stock split since listing was announced. The split ratio is 1:20. Each Amazon stock currently held will be exchanged for 20 shares, and the stock price will be reduced by 20 times. At the same time, the company also said it plans to repurchase shares worth 10 billion US dollars.
Affected by the news, Amazon surged 6% in after-hours trading.
1. Will a stock split change the fundamentals of the company?
Splitting stocks is just a numbers game. After a stock split, the number of shares will increase and the stock price will decrease, but the total market value will not change; it's like if you give me 5 1 dollar bills and exchange 1 5 dollar bill with me, I won't get any more money.”
Therefore, the spin-off will not change the fundamentals of the company, but only to make more minority investors willing to participate because they can buy more shares at lower prices. Note that minority shareholders' holdings are insignificant compared to major shareholders or large institutions. For investors who plan to hold for a long time, the company's revenue, profit, and future prospects are obviously more important than whether or not to split shares.
However, if we analyze it from the perspective of the actual interests of the majority shareholders, the higher the stock price, the less demand, and when shareholders want to monetize their shares, then more buyers are needed to take over. However, shareholders don't need to worry too much about monetization, because it is not ruled out that corporate investment will increase after the liquidation, or that shareholders will take the opportunity to absorb shares from retail investors after the stock split.
There is a big statement that there is no shortage of working capital...