Did you buy amazon stock? You will have more shares after the stock split | Smart Change: Personal Finance
(Charlene Reinhart, CPA)
Amazon‘s (NASDAQ: AMZN) The 20-for-1 stock split is fast approaching. Shareholders approved the stock split at the annual shareholder meeting on May 25, meaning the long-awaited split will take place on June 3. All shareholders will receive an additional 19 shares for each share of Amazon stock they own.
If a stock split sounds confusing, keep reading to see how a 20-for-1 Amazon stock split will affect your portfolio. This overview will give you a summary of the stock splits, because Amazon isn’t the only stock split this year, and it won’t be the last.
Introduction to stock split
Stock splits are back in fashion, and they’re stirring enthusiasm among investors. For the first time since the late 1990s, Amazon will follow the path of other tech giants and continue a stock split on June 3.
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If you currently have five shares of Amazon stock in your account, you will probably have to close your eyes twice after noticing a total of 100 shares in your account after the stock split. It is not wrong. You were just a 20-for-1 stock split participant. There is nothing you need to do to receive your additional shares. They will automatically appear in your account after the shares are split.
Although it may seem that you have hit the jackpot, this is not the case. The value of your shares will remain the same.
Let’s say your five shares were worth $10,000 before the stock split. If the stock price doesn’t change, your shares will still be worth $10,000 after the stock split.
A stock split breaks existing shares into smaller pieces. This lowers the share price and makes the shares more accessible to smaller investors.
One Amazon lot is worth about $2,300. As Amazon is going ahead with a 20-for-1 stock split, the stock price after the split will be about $115 per share. Amazon stock price will drop on June 6. The same way other stock splits in the market will work.
How many shares will you have in Amazon after the split?
Although stock splits work the same way, you’ll need to know the stock split ratio to determine how many shares you’ll have in your account after the stock split.
The numbers below use Amazon’s 20-to-1 stock split ratio as an example. The numbers on the left represent the number of shares you have registered as of May 27. The numbers on the right show the number of Amazon shares in your account after the stock split.
- 1 Amazon share = 20 shares after stock split
- 2 Amazon shares = 40 shares after the stock split
- 3 shares of Amazon stock = 60 shares after the stock split
- 4 shares of Amazon stock = 80 shares after the stock split
- 5 Amazon shares = 100 shares after the stock split
Fractional shares will also double
If you have a fractional stock, you will not be left out of a stock split. You’ll also wake up to more posts in your account after the stock split on June 3.
Fractional stocks are becoming popular because they allow you to access stocks without breaking the bank. It is easy for anyone to own any of their favorite companies in the world with just $100. Instead of paying the four-digit stock price of Amazon or any other high-priced stock, you choose how much to invest in the fractional stock.
Here’s how many shares you’ll get after a stock split if you own fractional shares on Amazon:
- 1/2 share of Amazon stock = 10 shares after the stock split
- 1/4 share of Amazon stock = 5 shares after stock split
- 1/5 share of Amazon stock = 4 shares after stock split
- 1/10 share of Amazon stock = 2 shares after stock split
- 1/20 a share of Amazon stock = Congratulations! You own one full share of Amazon stock
A stock split doesn’t reveal how successful a company is
Although a stock split can increase your stake count, it doesn’t always translate into guaranteed profits. Before you invest in Amazon or any other stock, it is important that you do your research. Choose stocks that align with your goals and risk tolerance and you’ll be better off in the long run.
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John Mackie, CEO of Whole Foods Market, an Amazon company, is a member of The Motley Fool’s Board of Directors. Charlene Reinhart, CPA has positions at Amazon. Motley Fool has and recommends positions at Amazon. Motley Fool has a disclosure policy.