com seems interested in restoring its image on Wall Street. Washington might require even more finesse.
A stock split and buyback plan announced late Wednesday shows the tech giant is working on the former. Amazon hasn’t split its stock since 1999 and, prior to this year, hadn’t repurchased any since 2012.
The new buyout plan adds $10 billion to a 2016 plan worth $5 billion that was not used until the company began buying shares in January. With the latest clearance, Amazon now has nearly $13 billion to invest in its own stock which has been in deep slump over the past year.
Meanwhile, a 20-to-1 split would make Amazon shares more accessible to the growing base of retail investors and give more flexibility to its own employees, who now number more than 1.6 million, to manage their equity in the business. It could also make the stock, which has spent most of the past 12 months above the $3,000 range, a candidate for inclusion in the Dow Jones Industrial Average. If passed now, the split would put Amazon’s share price just below the current price-weighted index median.
Alphabet, Google’s parent company, announced a similar split in February, and the two, with a combined market value of $3.2 trillion, are the largest US-based public companies not currently members of the Blue Chip Index.
Taken together, Amazon’s latest moves are “part of an increasingly shareholder-friendly series of actions,” according to Morgan Stanley’s Brian Nowak..
The company recently raised the price of its Prime service and began detailing the financial details of its advertising business, which generates more than $31 billion in revenue annually.
John Blackledge, analyst at Cowen,
noted that the buybacks “could also signal that (Amazon) has already entered the downward slope of its historic investment cycle,” potentially leading to improved earnings and cash flow going forward. Amazon shares rose 5.4% on Thursday despite a market selloff.
Amazon has long shunned typical methods of appealing to Wall Street because longtime founder and CEO Jeff Bezos has often argued that focusing on customers and maximizing free cash flow best serves long-term investors. And he was as good as his word; Mr. Bezos even avoided Amazon’s quarterly earnings calls from 2009 until he handed over the CEO reins to his successor Andy Jassy last July.
Mr. Jassy was poorly received. His appointment coincided with a sharp deceleration in sales growth as Amazon emerged from the boom it enjoyed at the start of the pandemic. Meanwhile, a burst of new investment to enable services such as one-day delivery has squeezed Amazon’s operating margins as investors bailed on riskier stocks deemed to lack leverage. profits.
Even with Thursday’s rebound, Amazon’s stock price is down 13% since announcing the CEO transition last February. Big tech peers Microsoft and Apple averaged an 18% gain over that period, while the S&P 500 rose 11%.
A more shareholder-friendly Amazon could help reverse that sentiment, especially as the company enters a slower growth phase, more befitting of a company on the cusp of surpassing $500 billion in annual sales. But Mr. Jassy must also figure out how to convey that sentiment to Washington, which has recently taken a particularly bleak view of Amazon. The Wall Street Journal reported on Wednesday that the House Judiciary Committee sent a letter to the Justice Department requesting an investigation into Amazon for a potentially criminal obstruction of Congress, a decision that has not been made against other giants. technology that are under investigation by lawmakers for alleged anti-competitive behavior.
Amazon, which denies the claim, is aiming to clear its purchase of MGM with Washington soon and presumably wants the chance to strike more deals as cloud rivals Microsoft and Google pursue their own deals. Getting to that point may require something that even $13 billion can’t buy: charm.
Write to Dan Gallagher at [email protected]
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