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(Repeats story first published on Monday.)
By Saqib Iqbal Ahmed and Lewis Krauskopf
NEW YORK, June 6 (Reuters) - Amazon's stock split may provide some solace to shareholders who have seen the e-commerce giant's shares battered this year.
Amazon shares were up 3.1% to $126.17 in afternoon trading after the 20-for-1 split, announced earlier this year but which took effect Monday. They have fallen 24% year-to-date, roughly comparable to the loss in the Nasdaq Composite, as rising interest rates slam risk appetite and pressure shares of high-growth companies.
While a split has no bearing on a company’s fundamentals, it could help buoy its share price by making it easier for a wider range of investors to own the stock, market participants said.
"Stock splits are certainly associated with successful stocks," said Steve Sosnick, chief strategist at Interactive Brokers. "The psychology remains that stock splits are good. We can debate whether they are or aren't, but if the market perceives them to be a positive, then they act like a positive."
Analysts at MKM Partners believe the rally in Amazon shares since May, during which they have cut their year-to-date loss by a third, has been aided by anticipation of the split.
"While we view this event as a largely non-fundamental one, we believe a stock split and potential retail trading activity could provide an incremental catalyst to turn sentiment on AMZN shares," MKM’s Rohit Kulkarni said in a note on Monday.
Stock splits may drive additional participation from retail investors, who, on average, tend to trade in smaller sizes due to their limited capital, relative to institutional investors, according to a Cboe report published in May.
The effect was most pronounced for stocks with larger market capitalization, according to the report, which analyzed 61 stocks across all market capitalization categories that have split since 2020.
Peng Cheng, head of big data and AI strategies at JPMorgan, said retail investors' ownership in Amazon’s shares had been comparatively low, compared to robust retail activity in the company’s options – a sign that a four-digit share price may have been turning off individual traders.
"Psychologically, it doesn’t feel good to spend $1,000 and own a third of a share," he said.
BofA Global Research has found that splits "historically are bullish" for companies that enact them, with their shares marking an average return of 25% one year later versus 9% for the market overall.
Stock splits may increase the pool of investors able to dabble in options, especially for stocks with high dollar value, analysts said.