Will Amazon see stock split under new CEO?
Jeff Bezos is Amazon's largest individual shareholder
During his nearly 30 years running Amazon.com, Jeff Bezos may be best known for his relentlessly long-term focus on his company’s growth and insistence at ignoring investor shorter-term demands.
But with his tenure as chief executive ending this summer, investors are betting that new CEO Andy Jassy will be more welcoming to their wishes. including announcing a long-anticipated stock split that could juice shares of the online retailer now hovering around $3,480 per share.
Traders and investors are hoping to get some hints about a possible stock split on Thursday when Amazon releases first-quarter earnings after the close of trading. Amazon is expecting another strong quarter with revenue above $100 billion and profits between $3 billion and $6 billion. Speculation about a stock split, first reported earlier in the week by FOX Business led to a 2.04% gain in shares, one of the biggest spikes in Amazon stock all year.
"I can't quantify the probability of when but a stock split is bound to happen, if not this quarter, next or sometime this year, especially if the stock continues to lag on superior earnings," said Scott Redler, chief strategic officer and founding partner of the trading company T3. "The barrier of entry just isn’t enticing for young investors. In order to get a new investing class in, you need to get liquidity and volume and a stock split would help the average investor get involved for the years ahead."
The biggest impediment to a stock split appears to be Bezos himself. Since going public in 2007, Amazon has split shares three times. The first in 1998 when it split 2-for-1. Then in January of 1999, it split 3-for-1 only to have a second split – for 2-for-1 – just a month later. Since that time, Bezos has been non-committal when asked about splitting shares though he hasn’t ruled it out either
An Amazon spokesman had no comment.
Many investors believe Bezos likes the status symbol of having a stock that trades above $3,470 a share. He is widely considered one of the best CEOs of the modern era, having created Amazon in his garage as an online seller of books that has morphed into one of the world’s largest market places of everything from toilet paper, to movies to NFL games to clothing and a lot more.
The one-time hedge fund manager maneuvered Amazon through the dot com bubble and crash where its shares languished to near penny stock levels. Today Amazon is among the world’s largest companies with a market value of $1.76 trillion, making Bezos the world’s richest man, surpassing Tesla chief Elon Musk earlier this week with a net worth of over $200 billion, as tracked by Forbes.
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Bezos also spread the wealth to long-term investors as shares have surged more than 2,670 percent since 2010 compared to a 290 percent growth in the Standard & Poor’s index of large-company stocks.
But Amazon’s lofty valuation has more recently kept a ceiling on its stock price—which is why many investors are predicting a stock split sometime soon. Investors say Amazon’s stock, which has traded consistently around $1,000 for nearly four years, is too expensive for many retail buyers to own. That combined with Bezos and his ex-wife MacKenzie selling their stock to fund various charitable interests and side hustles.
Notably, Bezos has created a space exploration company, Blue Origin, to rival fellow billionaire Musk’s Space-X, putting further downward pressure on Amazon’s stock for the past nine months, traders say.
Technically a stock split shouldn’t impact Amazon’s valuation—investors just receive more stock and the price reflects this dilution. But if the company does split its shares — as many investors are predicting either now or later in the year — the additional retail buying could bolster the company’s overall market valuation.
Meanwhile, Amazon would also be able to claim bragging rights as a member of the Dow Jones Industrial Average, which currently excludes the company from the popular index because of the astronomical stock price. Inclusion in the Dow is seen by some investors as another incentive to own the stock just as it helped Apple attract small investors to buy its shares following a 7-to-1 stock split in 2014.
"Amazon is crazy if they don’t do a split," said Tim Anderson, a managing director at TJM Investments. "The company could afford to split 10-to-1 and even as high as 15-to-1, still be in the high 100s and they would get included in the Dow."