Since the beginning of this year, US tech giants have sparked another wave of 'stock splits'. In addition to $Amazon (AMZN.US)$ , Alphabet, the parent company of Google, also announced a stock split plan. Tesla, which has drawn much attention, announced another stock split this year after its 2020 split.
On June 6 local time, the 1-for-20 stock split transaction announced by Amazon in March officially took effect, bringing the stock price back to a three-digit level. The stock price rose more than 5% at one point during the day and closed up 1.99% at $124.79.
Before the stock split adjustment, Amazon's stock price closed at $2,447 last Friday. The last time the stock price was below $1,000 was back in October 2017.
What is a stock split?
A so-called 'stock split,' also known as 'share division,' occurs when the price of an individual stock reaches a certain height, potentially deterring many investors and affecting the trading volume of the stock. Therefore, companies may consider splitting their shares. After a stock split, shareholders' equity will not change, nor will the company’s total market value. What changes is that since the share price becomes cheaper, it will attract more investors to buy the stock, increasing trading volume and liquidity.
In general, a stock split is a move welcomed by investors. While logically there is no difference between dividing a cake into eight pieces or four, it shows that listed companies are confident about their financial situation. Thus, in the initial phase of announcing a stock split, the company's stock price often rises.
What are the benefits of a stock split?
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