Hey There!
I’m sure by now you’ve heard about the Amazon 20 for 1 stock split.
This followed the announcement that Google was also doing a 20 for 1 split.
If you’re not familiar with how stock splits work, a 20 for 1 split means that everyone holding AMZ during the eligibility period will be given 20 shares for every one share at the same value.
So if AMZ is $3000 at the split, and you had 1 share you would receive 20 shares worth $150 each.
So mathematically there is no financial advantage to a stock split, but historically there are advantages.
Let's look at TSLA.
TSLA did a 5 for 1 split in Aug 2020. The night before the split, the shares were trading at $2213.
The next morning TSLA opened at $444 per share.
Let’s take a look at what happened next. |
The green arrow shows where the split happened.
You can see there’s a period of consolidation, but then it broke out higher, and had about doubled 4 months later.
Tripled 15 months after.
How long would it have taken for TSLA to triple if they never did a split?
Splits can also give investors who think they had missed out an opportunity to buy in.
One other thing to note about the AMZ split.
They are also doing a $10B buy back of their shares.
AMZ has been notorious for constantly issuing shares.
Larger investors hate this, because it dilutes the value of their shares.
This buyback should grab the attention of those investors, while lowering the supply and giving demand to the share price.
This could be a great opportunity!
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Happy Trading
Markay |
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