How will the Amazon 20-for-1 stock split affect investors

Amazon stock is about to get a lot cheaper after the company Advertise a stock split 20 for 1 this week.

The tech giant on Wednesday revealed plans for a split – its first since September 1999 – just a month later Alphabet, parent of Google, said it will do its own 20-for-1 split. The announcement sent Amazon shares up more than 6% in daily trading Thursday, to more than $2,900 per share.

A stock split usually occurs when the company’s stock price goes up significantly. In a stock split, a company splits its shares to lower its price and increase the total amount of shares available.

In Amazon’s case, existing shareholders will receive an additional 19 shares for every share they already own. This means that an investor who owns 100 shares will now own 2,000, but the total value of his holding will remain the same.

In a statement, Amazon said the split would make stock more affordable and “give our employees more flexibility in how they manage their stock.” If Amazon stock splits at Wednesday’s closing price of $2,785.58, the new stock price would be $139.28 per share, CNBC reported.

Analysts also speculated that the move might get the stock In the Dow Jones Industrial AverageIt is not currently a part of it due to its high price. Getting into the index can help increase the value of the stock because it will require all funds that own the Dow index to buy Amazon shares.

Although stock splits are often superficial and don’t change anything about the company, they can make stocks more attractive to investors, says Dan Ives, an analyst at Wedbush Securities, who mentioned recent splits from other Silicon Valley giants.

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“Although it does not change the valuation, from the perspective of the individual investor [the high price] That would make the stock less attractive,” Ives told CNBC Make It. With Tesla, Apple, and Alphabet all doing this, Amazon will be stuck like a sore thumb [if they didn’t]. “

Amazon stockholders will receive their bonus shares on Friday, June 3. Amazon will start trading at its new price when markets reopen on June 6.

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