Three things to know about the Amazon stock split

The Amazon stock split may be coming this year and when it does, it’ll be a big deal.

According to the Motley Fool, Amazon may split its stock next:

The skinny on stock splits
A stock split is a way for a publicly traded company to alter its share price and outstanding share count without affecting its market value. For example, if a company’s shares were trading at $400, and said company enacted a 4-for-1 stock split, shareholders would receive three additional shares for each share they already owned. Thus, if you had 10 shares at $400, you’d own 40 shares at $100 after the 4-for-1 split. The market value of the investment hasn’t changed (both are still $400 total investments), but share price and shares outstanding have been adjusted.

This common type of stock split, known as a forward split, tends to get investors excited for two reasons. First, forward stock splits make shares more nominally affordable for retail investors. Even though some brokerages allow users to buy fractional shares, this isn’t the case with every online brokerage. It’s a lot more palatable for investors to purchase a single share of Alphabet around $143 than it is to save up almost $2,900 to buy a single share now.

Secondly, forward stock splits are almost always a sign of a successful business. A publicly traded company’s share price wouldn’t be high in the first place if it weren’t executing well and innovating.

Having watched numerous big-name companies receive a boost after announcing a stock split, the following three high-flying stocks may be next to follow in Alphabet’s footsteps.

A parent carrying an Amazon package under their arm, while their child holds open a door.

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