6 ms·

Amazon announces 20-for-1 stock split, $10B buyback

61 points by zaltekk 5y ago

jsnodlin 5y ago
This is fantastic, will really make the Amazon stock much more accessible.
- whatever1 5y ago
  Why? Can't you just buy $1 worth of fractional Amazon stock from Robin hood?
kjhughes 5y ago
Amazon has been extraordinarily successful delivering shareholder value by plowing profits back into growing their business rather than via dividends or share repurchases. The buyback might seem to be a strategy change, but it is "only" a $10B authorization, and the last authorization never resulted in more than half of the purchasing happening: This stock repurchase authorization replaces the previous $5 billion stock repurchase authorization, approved by the Board of Directors in 2016, under which the Company had repurchased $2.12 billion of its shares. Source: Amazon Form 8-K: https://www.sec.gov/ix?doc=/Archives/edgar/data/0001018724/000101872422000009/amzn-20220309.htm https://www.sec.gov/ix?doc=/Archives/edgar/data/0001018724/0...
- deleted 5y ago
  [deleted]
imwillofficial 5y ago
Anyone know what a stock split typically means for current shareholder value? I’m assuming the price would go back up and shareholder might make a boatload of money. One one have any expert advice? I know nothing about stocks.
- awb 5y ago
  It just means that the price of an individual stock is too high for the average investor to be able to purchase it. AMZN closed today at $2,782.94. If they did a 20:1 split today, that means if you owned 1 share @ $2,782.94, when you wake up in the morning you would now own 20 shares @ $139.14 (20x the shares @ 1/20th the original price). It can lead to a slight bump in stock price because it's easier for average folks to buy a $139.14 share than a $2,782.94 share. More demand -> prices go up. However, macro conditions like the US economy, world news, or news that affects the business directly are probably going to have a greater impact on price than a stock split.
  - s1artibartfast 5y ago
    >It can lead to a slight bump in stock price because it's easier for average folks to buy a $139.14 share than a $2,782.94 share. This is true but one of the stupidest things in the market. Some retail investors have not concept of fundamentals. I have met some myself that don't understand that stock price is a function of the number of total shares.
- czzr 5y ago
  Theoretically a stock split doesn’t change anything - let’s say you used to have 100 shares valued at 10 dollars each, and the company decides to change that to 200 shares at 5 dollars. You still have the same amount of value (1000 dollars). So why do it? Usual reason is to make trading a bit easier - now you can sell 1 share at 5 dollars, rather than having to sell 1 share for 10, which might make it easier to find a buyer.
  - imwillofficial 5y ago
    In the past has this been a net gain? Got RSUs vesting this year and trying to decide to sell or keep.
    - geraldwhen 5y ago
      https://en.m.wikipedia.org/wiki/Endowment_effect https://en.m.wikipedia.org/wiki/Endowment_effect Given the cash, would you buy the stock outright? If not, sell.
giaour 5y ago
I realize that stock splits theoretically don't change anything for shareholders, but is that also true of RSU holders? Is an RSU a share held in escrow (and thus the number of shares should go from 1 to 20 for each RSU), or is an RSU a promise to give a single share to the holder at a future date?
- syspec 5y ago
  RSU shares are sort of "parked" and have some value total X - let's say 100k. When a split happens the parked shares also split and now there are more shares parked but still at at value of 100k.
  - giaour 5y ago
    That makes sense. Are RSUs parked in a legal sense (i.e., are they actually held in escrow from grant to vest) or is this just common practice?
- floatinglotus 5y ago
  Your RSUs should also be split.
- gowld 5y ago
  Are unvested RSU grants irrevocable in general?
  - giaour 5y ago
    I don't think so, since it's technically future income. If you quit or lose your job, unvested RSUs are revoked, and there are probably other circumstances on the employer's part that could have a similar effect. I once worked at a small (non-IPO'd) business that was acquired by a large multinational, and one of the first things the multinational did was to cancel all unvested options.
- mercutio2 5y ago
  Whoops, I read your question as being about the value of buybacks. Yes, RSUs are updated in response to a stock split the same way already issued existing stock is treated.
paulpauper 5y ago
lol $10 billion buyback = $100-150 billion in shareholder value created instantly (going by afterhours gains). That's why companies do buybacks even though the media complains about it. It's a good deal, at least in the short-term. Bezos wealth increased enough that he could pay back the buyback by selling some of his inflated stock. It's sort like an infinite $ machine.
- systemsignal 5y ago
  Probably a lot of benefit from stock split as well as can be seen with Tesla, nvidia, apple in the past
- trillic 5y ago
  Use seller data to figure out which of your competitor's products are the most profitable, copy their product, short-sell their stock, buy-back your own stock with the cash, sell a bit of it when it pops to pay your Yacht/Jet/Hooker bill. Some guys just have it all figured out, huh?
- chii 5y ago
  bezos selling to "cover" the buyback doesn't produce money. In fact, if he did that, he would lose out to transaction costs and gain nothing! Buy back doesn't create value (nor destroy value) - it just shifts the dollars from the company to shareholders, who could decide to sell to retrieve the money at a later date. Of course, buying back at a time when the share price is lower than expected (given a company's inside information) means they actually do gain value (lost from those shareholders who did the selling at the time of the buyback). Market participants who believe Amazon not to be irrational would also start buying as soon as they hear the news, assuming that there's inside info that the company is acting on resulting in such a buyback.
  - patrickthebold 5y ago
    One question I have is about the timing of the orders: If an investor wanted to buy a large amount of a company's stock, they'd be careful to try to not drive up the price for themselves (I would think.) But a company doing buybacks sorta wants to drive the price up. To what extent are they trying to get the best deal? I suppose it's a matter of if they are favoring their future share holders or the ones selling.
quotha 5y ago
Buybacks are not necessarily awesome.. https://news.ycombinator.com/item?id=28535516 https://news.ycombinator.com/item?id=28535516
- umeshunni 5y ago
  Uh, even the first line of the article isn't even true anymore > Even as the United States continues to experience its longest economic expansion since World War II

61 points by zaltekk 5y ago

jsnodlin 5y ago

This is fantastic, will really make the Amazon stock much more accessible.

whatever1 5y ago
Why? Can't you just buy $1 worth of fractional Amazon stock from Robin hood?

kjhughes 5y ago

Amazon has been extraordinarily successful delivering shareholder value by plowing profits back into growing their business rather than via dividends or share repurchases. The buyback might seem to be a strategy change, but it is "only" a $10B authorization, and the last authorization never resulted in more than half of the purchasing happening: This stock repurchase authorization replaces the previous $5 billion stock repurchase authorization, approved by the Board of Directors in 2016, under which the Company had repurchased $2.12 billion of its shares. Source: Amazon Form 8-K: https://www.sec.gov/ix?doc=/Archives/edgar/data/0001018724/000101872422000009/amzn-20220309.htm https://www.sec.gov/ix?doc=/Archives/edgar/data/0001018724/0...

deleted 5y ago
[deleted]

imwillofficial 5y ago

Anyone know what a stock split typically means for current shareholder value? I’m assuming the price would go back up and shareholder might make a boatload of money. One one have any expert advice? I know nothing about stocks.

awb 5y ago
It just means that the price of an individual stock is too high for the average investor to be able to purchase it. AMZN closed today at $2,782.94. If they did a 20:1 split today, that means if you owned 1 share @ $2,782.94, when you wake up in the morning you would now own 20 shares @ $139.14 (20x the shares @ 1/20th the original price). It can lead to a slight bump in stock price because it's easier for average folks to buy a $139.14 share than a $2,782.94 share. More demand -> prices go up. However, macro conditions like the US economy, world news, or news that affects the business directly are probably going to have a greater impact on price than a stock split.
- s1artibartfast 5y ago
  >It can lead to a slight bump in stock price because it's easier for average folks to buy a $139.14 share than a $2,782.94 share. This is true but one of the stupidest things in the market. Some retail investors have not concept of fundamentals. I have met some myself that don't understand that stock price is a function of the number of total shares.
czzr 5y ago
Theoretically a stock split doesn’t change anything - let’s say you used to have 100 shares valued at 10 dollars each, and the company decides to change that to 200 shares at 5 dollars. You still have the same amount of value (1000 dollars). So why do it? Usual reason is to make trading a bit easier - now you can sell 1 share at 5 dollars, rather than having to sell 1 share for 10, which might make it easier to find a buyer.
- imwillofficial 5y ago
  In the past has this been a net gain? Got RSUs vesting this year and trying to decide to sell or keep.
  - geraldwhen 5y ago
    https://en.m.wikipedia.org/wiki/Endowment_effect https://en.m.wikipedia.org/wiki/Endowment_effect Given the cash, would you buy the stock outright? If not, sell.

giaour 5y ago

I realize that stock splits theoretically don't change anything for shareholders, but is that also true of RSU holders? Is an RSU a share held in escrow (and thus the number of shares should go from 1 to 20 for each RSU), or is an RSU a promise to give a single share to the holder at a future date?

syspec 5y ago
RSU shares are sort of "parked" and have some value total X - let's say 100k. When a split happens the parked shares also split and now there are more shares parked but still at at value of 100k.
- giaour 5y ago
  That makes sense. Are RSUs parked in a legal sense (i.e., are they actually held in escrow from grant to vest) or is this just common practice?
floatinglotus 5y ago
Your RSUs should also be split.
gowld 5y ago
Are unvested RSU grants irrevocable in general?
- giaour 5y ago
  I don't think so, since it's technically future income. If you quit or lose your job, unvested RSUs are revoked, and there are probably other circumstances on the employer's part that could have a similar effect. I once worked at a small (non-IPO'd) business that was acquired by a large multinational, and one of the first things the multinational did was to cancel all unvested options.
mercutio2 5y ago
Whoops, I read your question as being about the value of buybacks. Yes, RSUs are updated in response to a stock split the same way already issued existing stock is treated.

paulpauper 5y ago

lol $10 billion buyback = $100-150 billion in shareholder value created instantly (going by afterhours gains). That's why companies do buybacks even though the media complains about it. It's a good deal, at least in the short-term. Bezos wealth increased enough that he could pay back the buyback by selling some of his inflated stock. It's sort like an infinite $ machine.

systemsignal 5y ago
Probably a lot of benefit from stock split as well as can be seen with Tesla, nvidia, apple in the past
trillic 5y ago
Use seller data to figure out which of your competitor's products are the most profitable, copy their product, short-sell their stock, buy-back your own stock with the cash, sell a bit of it when it pops to pay your Yacht/Jet/Hooker bill. Some guys just have it all figured out, huh?
chii 5y ago
bezos selling to "cover" the buyback doesn't produce money. In fact, if he did that, he would lose out to transaction costs and gain nothing! Buy back doesn't create value (nor destroy value) - it just shifts the dollars from the company to shareholders, who could decide to sell to retrieve the money at a later date. Of course, buying back at a time when the share price is lower than expected (given a company's inside information) means they actually do gain value (lost from those shareholders who did the selling at the time of the buyback). Market participants who believe Amazon not to be irrational would also start buying as soon as they hear the news, assuming that there's inside info that the company is acting on resulting in such a buyback.
- patrickthebold 5y ago
  One question I have is about the timing of the orders: If an investor wanted to buy a large amount of a company's stock, they'd be careful to try to not drive up the price for themselves (I would think.) But a company doing buybacks sorta wants to drive the price up. To what extent are they trying to get the best deal? I suppose it's a matter of if they are favoring their future share holders or the ones selling.

quotha 5y ago

Buybacks are not necessarily awesome.. https://news.ycombinator.com/item?id=28535516 https://news.ycombinator.com/item?id=28535516

umeshunni 5y ago
Uh, even the first line of the article isn't even true anymore > Even as the United States continues to experience its longest economic expansion since World War II