Amazon’s Stock Split Delivers More Than Bargained For

Rivai H Tukimen

(Bloomberg) — Stock splits were all the rage early this year as indexes hovered near record highs, with companies from Amazon.com Inc. to Alphabet Inc. announcing them to make their share prices more alluring to individual investors. A few months on, the market has taken care of the problem.

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Amazon, whose 20-for-1 split took effect Monday, is among companies whose stocks have tumbled since the moves were announced amid a broad market selloff that’s been especially painful for the technology sector. Shares of the e-commerce giant rose 2% in New York after the split, but shares are still down about 10% since reporting the plan in March. Alphabet, which announced a similar proposal in February, is down 17% since then.

The selloff means the stocks will be trading at a discount to the sticker price originally envisioned by executives. That will make it easier for the behemoths to gain entry to the Dow Jones Industrial Average, whose weighting is based on share price, but it could have the effect of making them look less princely than their massive market values and history of big gains would imply.

“Stock splits are usually a sign of optimism,” said Mark Lehmann, chief executive officer of JMP Group. “Very few companies split their stock in anticipation of things going poorly. It’s an example of what’s reflected in the entire market.”

Splits, of course, have no fundamental effect on share value — they’re the stock market equivalent of exchanging a $20 bill for two $10s. But in the buoyant market of early 2022, they were met with bidding wars by giddy traders.

For companies like Shopify Inc. that have fared even worse than Amazon and Alphabet amid an exodus from stocks with the highest valuations, the splits could make them look downright pedestrian. If the 10-for-1 exchange plann by the Canadian e-commerce company was done today, it would result in a US share price of about $35 following a 79% crash from a November high when the stock closed at a record $1,690.60. The median stock price in the S&P 500 Index, by contrast, is around $113, according to data compiled by Bloomberg. Shopify’s split is set to take effect on June 29.

Of course, the sour market sentiment could cause companies like Tesla Inc. to rethink their plans. The electric-car maker said in late March it would ask investors this year to approve the creation of additional shares for the purposes of another split. The stock was trading above $1,000 at the time. Since then, the shares have lost nearly a third of their value, closing Friday at $703.55, amid manufacturing problems in China and concerns about slowing growth.

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Didi Global Inc. shares surged 65% on Monday after the Wall Street Journal reported that Chinese regulators are preparing to wrap up their investigation into the ride-hailing giant. Shares were trading at around $3, still about 81% below its $16.40 peak close in July last year. Through Friday’s close, Didi shares had sunk nearly 90% from their peak, wiping off more than $70 billion in market value, after its blockbuster US listing drew the wrath of Beijing and made it the face of the nation’s tech crackdown.

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  • Chinese regulators are preparing to wrap up their investigation into Didi Global Inc. and restore the ride-hailing giant’s main apps to mobile stores as soon as this week, the Wall Street Journal reported. Didi shares soared in US premarket trading

  • Tesla Chief Executive Officer Elon Musk sent staff, investors and electric-car watchers on a three-day rollercoaster with conflicting messages about potential job cuts, underlining the sometimes erratic nature of his leadership and muddying the automaker’s outlook

  • A Toshiba Corp. external board member said the company’s plan to appoint two directors representing activist investors lacks fairness and balance, opposing their election in a shareholder vote this month

  • Carro, one of Southeast Asia’s biggest online marketplaces for used cars, has agreed to buy a 50% stake in Indonesian automotive financing and rental company MPM Rent for S$75 million ($54.5 million) to expand in the world’s fourth most populous country

(Updates share move in last paragraph.)

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