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Shopify, Alphabet and Amazon stock splits on the horizon? (Feature Image Source: Shopify)
Summary
- Stocks of Silicon Valley giants -- Apple and Tesla – surged after their stock splits came into effect in August.
- Their success has prompted stock split speculations of Amazon, Alphabet and Shopify.
- Shopify stocks have surged over 188 per cent year-to-date.
- US tech giants are facing intense scrutiny as they go through antitrust hearings and fight accusations of anti-competitive behavior.
- Soaring market valuations of Shopify, Amazon and Alphabet has a direct impact on the performances of the index, which can attract broader political attention.
- A stock split can potentially diffuse such situations.
The red-hot shares of Apple (NASDAQ:AAPL) and TESLA (NASDAQ:TSLA) went on an overdrive last week after their stock splits came into effect. The shares of the two Silicon Valley giants saw a massive build up till the main act, searing up the Nasdaq index for days at a stretch. This success has prompted market speculations of a probable stock split of tech giants such as Amazon, Alphabet and Shopify.
What is Stock Split or Stock Divide?
When a company decides to break up or divide its shares into multiple new shares, leading to an increase in the overall number of shares, it is known as stock split. This enables companies to create less expensive stocks making it easy for investors to acquire low-priced shares.
For instance, a company with C$ 600 per share decides to enforce a 2-for-1 stock split. The C$ 600-stock will split into two C$ 300 shares and the investor will now have two shares for each one they owned.
Earlier August, electric carmaker Tesla announced the 5-for-1 stock split. The company closed at US$ 2,238.75 per share before the split on August 27. After the split, shares opened at US$ 444.61 on Monday, August 31, 2020. The stock price surged by over 12 per cent on Monday and closed at US$ 447.75. As per market research firm FactSet, the trading volumes went up from 73.4 million shares to 115.1 million shares. The US$ 416.8 billion-carmaker is currently trading at US$ 447.37, up nearly 420 per cent this year.
IPhone and Macbook maker Apple has implemented stock split a total of five times since it went public in the ‘eighties. It announced the latest 4-for-1 stock split last month, which came into effect on August 28. Its market valuation crossed US$ 2 trillion, overtaking Saudi oil giant Aramco, following the announcement of the stock split.
The shares closed at US$ 499.23 on August 27 and was expected to open at US$ 124.81 on Monday. However, the scrips fell by over by 75 per cent. Before this, Apple split its stock 7-for-1 in June 2014 and 2-for-1 splits in times in 1987, 2000 and 2005. The iPhone makers’ stock is currently trading at US$ 131.40 and is up 75 per cent year-to-date.
Alphabet and Amazon Stock Splits on the Horizon?
Following the stock splits of the two Silicon Valley companies, voices suggesting stock split of tech giants such as Amazon and Google parent Alphabet are growing louder.
Amazon (NASDAQ: AMZN) stocks are currently trading at US$ 3,400 per share, which is deemed pricey by some investors. If Amazon splits its stock by 10-for-1, then the owner of one share will now have 10 shares, each valued at US$ 340. It’s been over two decades since the e-commerce giant split its stock. The company’s current market cap is US$ 1.7 trillion.
Alphabet (NASDAQ: GOOG, NASDAQ: GOOGL) stocks are currently trading around US$ 1700 a pop. If the search giant decides to go for a 10-for-1 stock split, one share will be divided into 10 shares of US$ 170 each. The company’s current market valuation is US$ 1.17 trillion.
Both these giants have been under intense scrutiny amid the COVID pandemic and US Congressional antitrust hearing. As their profits soar, so does the accusations of anti-competitive behavior. The movement of these heavyweight stocks have a direct impact on the performances of key index, which attracts broader political attention. When the news of antitrust hearing hit the markets, shares of Alphabet and Google together lost about US$ 130 billion in market value, causing the American technology index Nasdaq enter correction territory. A stock split can potentially diffuse such situations.
Will Shopify too follow suit?
Canada’s biggest company (by market value) is likely the largest success story amid pandemic times. The stocks of the e-commerce company, that empowers retailers and small businesses to go online, have surged over 188 per cent year-to-date. Shopify stocks advanced over 8 per cent in a month and over 44 per cent in three months.
Shopify (TSX: SHOP) entered the four-figure stock price club in the summer of 2020. Since its trading debut on the Toronto Stock Exchange (TSX) in 2015, the shares have returned over a whopping 4100+ per cent. Valued at C$ 151 billion, the e-commerce giant supports over two million jobs and hosts hundreds of thousands of sellers worldwide.
The company’s scorching rally has edged the TSX higher. While the consistent rise in its share price value is a boon for investors, it may also attract unwanted attention. Some analysts think that the Shopify bubble will soon burst, dragging the entire TSX index low, as was the case with some US big tech companies. Shopify still has a lot of room to expand in other areas and a stock split may be a good idea, market analysts suggest.
