Come June 6, if you owned one share of Amazon stock, you will own 20. And those shares will be worth one-twentieth what they were the previous day. In other words, nothing is changing, but people are excited anyway!
approved a 20-1 stock split Wednesday, which will reduce the price of Amazon shares by issuing a bunch of new shares to existing shareholders, making Amazon worth exactly the same as it was previously, just with more shares worth less money. Amazon's shares nonetheless jumped 6% on the news, because investors have collectively convinced themselves that stock splits are a reason to pay more for a stock.
A long time ago, when retail investors were a more significant factor in stock trading, companies split their stocks to make single shares more affordable. Amazon did this three times in the ’90s as its shares ran up during the dotcom boom. It stopped doing splits in the dotcom bust, when the stock market took care of reducing the value of Amazon shares for it.
Now that you can buy fractional shares of just about any publicly traded companies, this is pointless, but companies still split their shares anyway, perhaps because it seems like bad form to have four- or five-digit share values.
Amazon is also authorizing a $10 billion share buyback. Investors like this, too, even though it could be taken as a sign that a company has no idea how to invest its cash. Amazon used to just build more warehouses and data centers when this happened, but, hey, sure, a buyback, why not.
In theory, Amazon could split the stock and see shares skyrocket back up to its pre-split levels. That would be wild, but consider that its shares are up almost 500-fold from its 2001 low point and people think dogecoin is worth something. Of course, if we time-traveled back to 1999, the last time Amazon split its stock, and told people Amazon would run the internet's infrastructure, be a major Hollywood studio, and have Star Trek-like communicators in people's homes, they would regard that as equally strange. Perhaps we are in the best of all possible worlds.
Update: This story has been corrected on March 9, 2022, to note the correct date of Amazon's stock split and clarify the status of its stock buyback.