Editorial StaffShopify is planning a 10-for-1 stock split. Should investors buy or sell the stock on this news?
Shares of Shopify (SHOP) – are not reacting to the company’s planned stock split news the way that bulls were hoping.
While the stock is now up 3% on the day, it was down more than 1.5% shortly after the open. Still, the action is a bit muted.
Investors are hoping that Shopify stock eventually gets the love that we saw in Amazon (AMZN) – and Alphabet (GOOGL) – (GOOG) – after those two announced stock splits earlier this year.
That said, the split announcements are not having the same impact as before.
For instance, stock split announcements for Tesla (TSLA) – and Apple (AAPL) – sent the share prices exploding higher in the summer of 2020. I’m of the opinion that Amazon would have seen its share price explode higher too, had it announced the split during a bull market, rather than in the throes of high volatility and a bear market in tech stocks.
The situation for Shopify stock is even worse.
When Amazon announced its split, the stock was 26% below its all-time high. When Shopify announced its 10-for-1 split, the stock was down 66%.
If management needs a catalyst, I don’t know if a stock split is it. I’m not discounting the psychological impact or the effect it can have on sentiment, but since it doesn’t have a fundamental impact on the company, it may very well not be enough to move the stock price in a meaningful way with the exception of a short-term bounce.
One could argue that Amazon stock rallied more than 20% in the weeks after the announcement. But it also came just days before the S&P 500 bottomed and ripped off an 11.5% gain as it rallied in nine out of 11 sessions.
Source: The Street
