Amazon announces 20:1 stock split

Amazon has announced a 20-for-1 stock split and a share buyback worth up to $10 billion to boost its share price amid high operating costs and concerns about employee retention.

The stock split, which technically doesn't change the company's fundamental value but often inspires investor optimism, is the fourth in the company's 28-year history. The last was in September 1999.

Amazon stock closed Wednesday at $2,785.58. The announcement triggered a price jump of around 7 percent in after-hours trading.

Trading on the new split-adjusted basis will begin June 6 if shareholders approve at Amazon's annual meeting in May, a statement said.

The company follows a similar move by <a class="tvreplink" target="_blank" href="https://www.tradingview.com/chart/?symbol=Nasdaq%3AGOOG">Alphabet, which announced a 20-for-1 split last month. In 2020, amid rising markets during the corona virus, Apple and Tesla announced their own 1:4 and 1:5 stock splits respectively.

"Big tech companies have rallied massively during the pandemic and stocks are now ripe for a split," said Dan Ives, analyst at Wedbush. "Amazon is following Apple, Tesla and Alphabet towards a stock split. These are smart moves as investors take stock splits positively."

Amazon's value has increased by more than 220 percent over the past five years, bringing it to a market cap of more than $1.4 billion. But after the stock price rallied early in the pandemic as households turned to the company in large numbers, it faltered as the true cost of keeping logistics running became clear.

Shares of the company are down 18 percent year-to-date, compared to an 8 percent decline at Alphabet and 11 percent at Apple.

Amazon board approval for a $10 billion share buyback has no expiration date and replaces a previous 2016 approval for a $5 billion buyback, of which $2.12 billion US dollars were bought back. Of that, $1.3 billion was repurchased earlier this year, the first purchase of its own shares since at least 2018, according to a report.

"The stock split has no fundamental impact on the business," said Brent Thill, an analyst at Jefferies. "But the buyback will result in a lower number of shares and hopefully higher earnings per share."

The move is the Seattle-based company's latest attempt to offer additional incentives to its employees, having long faced criticism for paying less than its tech-sector rivals. Last month, Amazon told employees in a memo that it would raise the base salary cap from $160,000 to $350,000.

Amazon said, "This split would give our employees more flexibility in how they manage their ownership of Amazon and make the stock price more accessible to people looking to invest in the company."