Amazon (AMZN) CEO Jeff Bezos lost the top billionaire spot to Tesla CEO Elon Musk in 2021. Bezos became the world’s richest person in 2017. However, the 740 percent rally in Tesla stock and the generous stock options that the rally unlocked for Musk, made him the world’s richest person. Among other things, the split in Tesla stock helped propel it higher. Will Amazon split its stock in 2021? Would a stock split help Bezos reclaim the top billionaire spot?
Fundamentally, stock splits and bonus shares don’t make any difference. The stock’s EPS would fall commensurately to reflect the split, which was 5-for-1 in Tesla’s case. However, splits help increase liquidity which is a key driver of stock prices, at least in these markets.
Amazon's stock split history
Since Amazon went public in 1997, the company has split its shares three times. The first split was in 1998 when Amazon split its shares 2-for-1. The company followed up with two stock splits in 1999. At the time, tech stocks had risen to astronomical heights. Usually, we don’t see two stock splits in a year from reputed companies.
Will Amazon split its stock in 2021?
From a price perspective, Amazon stock trades way above what it did when it split its shares in 1999. Even from an absolute perspective, Amazon stock trades at around $3,300 per share. It's the most expensive stock (based only on the absolute price) compared to the other FAANG stocks and most other tech companies.
Stock split could help Amazon stock
At $3,300 per share, Amazon looks expensive for many retail traders with lower total portfolio sizes. For example, if you only have $10,000 to invest, you might not buy Amazon stock. It would then account for around a third of your portfolio. However, you can certainly play around with stocks whose prices are in triple digits.
Given the fact that Robinhood traders have helped buoy many tech companies' stock including Tesla, Amazon could also see some upside if it announces a stock split. One reason Amazon isn't very popular among Robinhood traders is its high stock price.
Jeff Bezos on Amazon’s stock split
Analysts have been questioning Bezos on when the company will split its stock since at least 2017. Back then, he didn't rule out a split but didn't give a timeline. Since then, Amazon stock has surged. The splits from some of the other tech companies and the resultant rise in their stocks could prompt Amazon to also announce a split.
If Amazon announced a stock split Bezos would be worth $250 billion next week— Hipster (@Hipster_Trader) August 26, 2020
Jeff Bezos versus Elon Musk
Musk and Bezos aren't the best of friends. They have different world views and also compete in many industries including space travel. Amazon has also invested in Rivian, an electric vehicle startup company, and placed an order for 100,000 of its trucks. Musk has mocked Bezos and called him a copycat. He even backed calls to break up Amazon.
Over time, Musk and Bezos have been running neck and neck when it comes to their net worth. According to Forbes, Bezos had a net worth of $193.3 billion on Jan. 27, while Musk had a net worth of $182.9 on the same day. The net worth is based on the stock's closing prices on Jan. 26. If Amazon splits its stock in 2021, it might give Bezos some firepower to decisively beat Musk in the global billionaire ranking.