Shares of e-commerce giant Amazon had popped more than 4% during its first day of trading since splitting its shares 20-for 1.
It was in March that the company had said investors would receive 19 additional shares for each one they owned on a split-adjusted basis. Since the announcement, shares of Amazon were down about 12% as of last Friday’s close.
The split does not change the value of the stock or the company’s market capitalization at the time of the split. This is now the fourth time Amazon has split its stock since going public in 1997.
Alongside the split, the company will pursue a $10B share buyback program, replacing a previous $5 billion authorization from 2016.
“Evidence suggests that stock-split events drive additional participation from retail investors, especially in securities with larger market capitalization,” said data analysis by the Chicago Board Options Exchange.
“Volume in mega-cap equities initially spiked 342% the week immediately after the split.”
“Apple’s unadjusted post-split customer volume increased by 92%, averaging 1.7 million daily contracts executed, compared to 0.9 million contracts pre-split,” the report noted.
“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.”
Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.