On Wednesday, 03/09/2022, Amazon’s (AMZN) board of directors approved a 20:1 stock split.
The news exploded all around the finance world. It is something many investors have been anticipating for quite some time.
Immediately after sharing the news on social media, I received many questions from the Girl$ on The Money community.
Check out the Q&A below. If I am missing anything, please ask it in the comments section or email me email@example.com.
Question #1: When is the split happening?
Updated to add: According to a recent Wall Street Journal article, shares will start trading at the new post-split price starting on 06/06/2022:
Question #2: What does a “20:1 split” mean? Here’s the short story:
Let’s say that on the day the split gets processed; Amazon is selling at $3,000 per share.
Now, let’s say that you had one share of Amazon in your investment portfolio on that day.
After the 20:1 stock split goes through, you’ll have 20 shares worth ~$150 each. Simple math: 3000/20=150
On the other hand, let’s say that you are currently not a shareholder of Amazon and don’t have any stock in it. However, it is something you’ve had on your radar.
Well, after the split goes through, you’ll be able to purchase individual shares of Amazon for around ~$150 each.
Important: The per-share price the day after the split will depend on how much one share of Amazon was selling for the day before.
Notice that absolutely nothing changes about the fundamental value of the business or the investment.
A split makes the stock price more “affordable” for new investors and anyone that wants to buy.
If I own Amazon stock, do I need to do anything?
If you already own the stock, there’s nothing for you to do. You’ll notice the change in your investment account once the split goes through starting on 6/6/22.
Why are they doing this?
The stock price has gotten relatively expensive. And so, by doing the split, they give access to more people to invest in the company. Also, it makes it easier for Amazon employees to manage their stock compensation.
Should I wait until after the split if I am interested in buying the stock?
First of all, you should never invest in a company “just because” they are doing a split. That should never be your only reason.
With that said, if Amazon is a stock you’ve been waiting to buy for many years and felt the price was “too high,” the split can present an excellent opportunity to grab some shares.
However, it doesn’t matter if you get them now or wait until after the split. It will boil down to this:
If you have ~$2,900 right now (that’s the current price per share), you can go ahead and buy one single share. Once the split goes through, you’ll have 20 shares worth ~$145 each.
If you don’t want to allocate over $2,900 of your money to Amazon stock at this time, you can wait for the split and grab how many shares you want at the cost of ~$145-$150 each- or whatever the price is at that time.
Important: The above illustration is just an example for educational purposes. The per-share price the day after the split will depend on how much one share of Amazon was selling for the day before.
Let me know if this makes sense! =)
And that’s all, folks! Thank you for reading.
REMINDER: In the upcoming Ready, Set, Invest workshop, I will be teaching participants how to select and open an investment account, how to fund it, how to make educated investing decisions, how to process an investing transaction, and so much more!!
If you want to be READY to grab some shares of Amazon when the time comes, or any other stock or fund, this workshop will be well worth the investment! For full detail and to register, click here.
2 thoughts on “Amazon’s 20:1 Stock Split – Explained In Plain English.”
Thanks so much for explaining. I asked about the split on your FB page. So glad I kept reading! Great explanation in layman’s terms.
Thanks so much for your kind words and your feedback regarding the post! So glad is now clear 🙂