Amazon.com Inc (NasdaqGS: AMZN) surged after announcing a stock split and share buyback plans, lifting consumer discretionary sector-related exchange traded funds.
On Thursday, the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) rose 0.6%, the Vanguard Consumer Discretionary (NYSEArca: VCR) gained 0.6%, and the Fidelity MSCI Consumer Discretionary Index (NYSEArca: FDIS) was up 0.7%.
Meanwhile, Amazon shares advanced 6.4%. AMZN makes up 23.6% of XLY’s underlying portfolio, 22.9% of FDIS, and 21.0% of VCR.
Amazon is planning its first stock split since the dot-com boom, outlining to investors a 20 to 1 stock split, CNBC reports.
Furthermore, the e-commerce giant also said the board authorized stock repurchases of up to $10 billion worth of shares.
While stock splits are mostly cosmetic and do not change the worth of the company, the cheaper share prices will make Amazon stocks more accessible to a larger number of investors.
Time To Adjust
The company argued that the adjustments are being made to adjust its compensation strategy and targeted to help corporate staffers.
“This split would give our employees more flexibility in how they manage their equity in Amazon and make the share price more accessible for people looking to invest in the company,” an Amazon spokesperson said in a statement.
Morgan Stanley analyst Brian Nowak noted it is encouraging that Amazon is becoming more “shareholder-friendly,” with the company joining other big tech names like Apple Inc. and Alphabet Inc. which have used splits to make their shares more attractive to retail investors, Bloomberg reports.
According to BofA Global Research, splits have historically been positive events for the companies. The firm calculated that on average returns shares returned 25% after a year from the announcement, compared to the 9% gain for the overall market.
Amazon shares have been hit in recent months, falling off 16% so far in 2022. The stock was the worst performer among the big technology companies. The company also recently reported its slowest rate of growth for any quarter since 2001.
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