Amazon Approves First Stock Split Since Dot-Com Era, Dow Inclusion a Possibility
Stock Split Like It’s 1999
Amazon’s (AMZN) midweek announcement that its board of directors approved a 20-for-1 stock split marked the fourth such split since the company first went public in 1997. It’s the first since 1999, the height of the dot-com era. Amazon says its board also approved buying back up to $10 billion worth of shares.
Analysts note that stock splits don’t change anything about a company’s fundamentals. The thinking behind the move is that by expanding the number of shares at a lower individual price, more people will be able to invest in the company. Amazon specifically notes the stock split is aimed at giving employees more flexibility when it comes to the managing of their company shares.
Amazon After Alphabet
The split announcement from Amazon continued a recent trend in Big Tech, as just last month Google parent company Alphabet (GOOGL) announced a 20-for-1 split. Both Apple (AAPL) and Tesla (TSLA) informed investors of stock splits in 2020.
Amazon stands apart, however, in that it’s the highest-valued tech company to dilute its share price by way of a stock split. The move comes after Amazon posted its slowest rate of quarterly growth since 2001. Changes were also recently made to the company’s employee compensation strategy.
Could Dow Inclusion Be Next?
A number of market observers are now openly wondering if Amazon’s stock split is a precursor to the company’s inclusion in the Dow Jones Industrial Average. Representatives of Standard and Poor’s Dow Jones Indices and Wall Street Journal editors form a committee that decides who is included in the 30-member club.
Amazon isn’t the only tech firm eyeing potential inclusion in the Dow. Some analysts argue it could end up being a “draw” in terms of whether Amazon or Alphabet might join the blue-chip average first. In 2020 both Salesforce (CRM) and Honeywell (HON) became the most recent companies to gain inclusion into the Dow. Salesforce, Apple, and IBM (IBM) rank as the biggest tech names in the index. The 20-for-1 stock split could set Amazon up to join the ranks.
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