Amazon surges as stock split, buyback excite investors

Source: Reuters

Shares of Amazon.com Inc jumped 5% after the e-commerce giant's massive share split and buyback drew more investors to a stock that has seen its price skyrocket since going public 25 years ago.

The company's 20-for-1 stock split is its first since 1999 and is in addition to a $10 billion share buyback. It also comes on the heels of a similar split announced by Alphabet Inc earlier this year.

"Amazon's management is looking to instil fresh confidence," AJ Bell Investment Director Russ Mould said, adding that the buyback was the company's first direct distributions of cash back to its shareholders since its stock market debut.

ALSO READ: Amazon announces 20-for-1 stock split, $10 billion share buyback

The company's stock closed near a two-year low at $2,785.58 on Wednesday after riding a pandemic-induced rally in tech shares that brought it within striking distance of a $2 trillion valuation mark.

Amazon's stock ticker was trending on investor focused social media site stocktwits.com and was among the most discussed on Reddit's wallstreetbets, according to sentiment aggregator Swaggystocks.

Shares of Apple Inc and Tesla Inc rallied sharply after their stock splits in 2020, with Tesla eventually joining the S&P 500 by the end of the year.

Amazon's stock split "just makes inexperienced investors and traders feel better", said Perri Dong, a China-based portfolio manager at Redwood Winslow LLC, who said he owns Amazon shares.

"It's just psychological. Some people believe the shares will have more liquidity but I argue it doesn't matter."

The company went public in 1997 at an IPO price of $18, or $1.50 when adjusted for stock splits that occurred in 1998 and 1999.

The latest stock split will take effect on June 6.

Amazon's share surge on Thursday was a bright spot in an otherwise gloomy market, where shares of mega cap companies such as Apple Inc and Microsoft Corp were trading lower.