By: Tom Gentile
on March 16th, 2022
This is the type of stuff that goes on typically in more bullish market environments.
Many folks will tell you that there isn’t any value difference in your holdings after the split than there was before it. An example: 100 shares at $200 pre-split is the same as 200 shares at $100 post-split. It is the same $20,000 worth of stock.
I do not deny that, but what they are missing is the history of stocks after the split. They have a habit of running higher. It could be that for new investors they feel they can get in on the stock/purchase it now that it is a cheaper price prior to the stock split.
Add in the company’s plan to buyback stock and the prospect of AMZN, in this case, trading higher in price makes for gains in the stock a strong possibility.
Should AMZN regain its pre-split price (no matter how long it takes), one then realizes a double or 100% gain in the stock.
Amidst all this market uncertainty and price volatility and expensive Implied Volatility (IV) it is an opportunity many investors may feel too good to pass up.
I am not recommending any investment or even trade on AMZN but providing my view on why investing in a company going through a split might be something one wants to discuss with their broker.