Should You Buy Amazon Before Its Stock Split?
Amazon (NASDAQ: AMZN) recently announced a 20-for-1 stock split. Shareholders of record at the market close on May 27 will receive 19 additional shares for every share they own. The split will go into effect on June 6.
Unfortunately, the extra shares are not free. Shareholders get more shares, but the stock price is adjusted proportionally so that the value of the investment stays the same. Nonetheless, the lower stock price will make it easier for investors to buy a single share. If the stock split went into effect today, it means Amazon's share price would trade for about $145. In the very near term, the lower share price could theoretically boost demand for the stock and send it a few points higher.
However, investors should bear in mind that the best reason to buy any stock is the long-term outlook for the business itself. Consider that Warren Buffett's Berkshire Hathaway has never split its class A shares since Buffett took over as CEO in 1965. That's why the class A shares trade close to $500,000 per share right now, yet early Berkshire Hathaway investors have made a fortune from patiently holding their shares over decades.
Source Fool.com
