Overdue for a split?

Q

Why hasn’t Amazon.com split its shares recently? Is it due for a split soon? — G.K., Ocala, Florida

A

The company “went public,” issuing shares on the stock market for the first time via an initial public offering in May 1997. It split its stock three times soon after, splitting 2-1 in 1998 and 3-1 and 2-1, both in 1999. In the 20plus years since, there have been no splits. In early March, its shares were trading at about $1,954.

But the number of shares a stock has isn’t too significant on its own. Two companies may each have a market value of $50 billion, with one having 1 billion outstanding shares priced at $50 apiece, and the other having 250 million shares priced at $200 apiece. A company’s market value is far more meaningful than its number of shares. And Amazon’s market value has soared, recently topping $1 trillion.

It won’t be surprising if Amazon splits its shares in the coming years, if only to make them more affordable for average investors. If you wanted to invest $1,500 in Amazon and shares are trading for $2,000 apiece, you couldn’t afford a single share. But if, say, the company split its shares 20-1, shareholders would suddenly have 20 shares for every share they owned pre-split, and those shares’ prices would be reduced proportionately (leaving the total value of their holdings unchanged). In such a split, shares costing $2,000 pre-split would sell for about $100 post-split, and someone with $1,500 could afford to buy 15 shares.

Q

What’s the Pension Benefit Guaranty Corp.? — T.L., Mankato, Minnesota

A

It’s a federal agency that insures benefits in private traditional pension plans. Learn more at PBGC.GOV.