2022 has been a tough year for the stock market, but it's been a good year for those who like to see stock splits. Some of the biggest names in the market have moved forward with splitting their shares even after having held out for years. Tech giant Alphabet and rising Canadian e-commerce star Shopify both decided to do stock splits to bring their share prices more within reach of average investors in recent months. Meme stocks like GameStop also joined the stock-split bandwagon, and Tesla is slated to complete a 3-for-1 stock split this week.
Arguably the biggest stock split of the year, however, belongs to Amazon.com (AMZN 1.97%). The provider of e-commerce and cloud computing services had been a long holdout in choosing not to do a stock split even as its share price rocketed into quadruple digits. The announcement of its 20-for-1 stock split ignited a lot of excitement about the company's future prospects. It also provided an immediate boost to the share price.
NASDAQ: AMZN
Key Data Points
Now that the Amazon stock split is history, however, it's useful to look back and see whether all the hype was warranted. In the end, the lesson for Amazon shareholders is that the split won't have any lasting impact on the business or the stock.
A timeline of Amazon's stock split
Amazon announced in early March that it would seek to split its shares. The move required a shareholder vote to approve the split, so it took a few months for Amazon to navigate the process and obtain approval at the company's annual shareholder meeting. Once it got the go-ahead, Amazon moved forward, and the stock split took effect in early June.
Below, you can see the relative performance of Amazon stock from the time of the announcement to when the split took effect:
As you can see, Amazon's stock got a nice boost immediately after the stock split announcement. Over time, though, fundamental factors played a bigger role, and you can see the sharp moves that accompanied Amazon's release of quarterly financial results in late April.
Moreover, in the weeks leading up to the finalization of the split, Amazon's stock started to catch up to benchmark indexes. By the time of the split, Amazon had seen very similar performance to that of the broader market.
After the split
Following the split, you can see a pattern that looks generally like the opposite of what happened before the split. Shares underperformed the broader market substantially in the week or two following the completion of the split. Gradually, though, the stock caught up to the benchmark.
Again, fundamental factors proved to be decisive in helping Amazon outperform over the period. The big jump in the stock price in late July corresponded with the release of its quarterly results, which reassured investors of the company's long-term strength.
What Amazon shareholders got from the split, therefore, is a simple lesson. The stock split was a distraction from the way the business performed, but in the end, the share price tracked investor sentiment about its operations.
Stop fretting about stock splits
It's fun to look at stock splits and see how investors seem to react so strongly to split announcements. Yet in the long run, they really don't matter. What's far more important is whether a business keeps doing well and generating good financial results. When that happens -- as has been the case with Amazon -- shareholders can expect superior long-term returns regardless of the share price or how many shares of stock they own.
