Last week, Amazon (NASDAQ: AMZN) became the most-recent big-tech firm to announce a stock split. The ecommerce, video streaming and web services giant will conduct a 20-for-1 stock split, its first stock split since September, 1999. 

It comes just one month after Google parent company Alphabet (NASDAQ: GOOGL) announced similar plans, and with Amazon the only FAAMG' stock with a four-digit share price.

What does this mean for investors? Let run through the important points.

What is a stock split?

For those unfamiliar with the concept of a stock split, this is where a company consolidates and thereby increases the amount of shares on issue in order to reduce the current trading price and make the stock more accessible to retail investors.

This is because when certain stocks, especially one like Amazon are trading at a very high price, not all investors can afford to buy whole units of shares in the company.

The stock split in itself has no effect on the underlying business, rather it changes the capital structure of the company without impacting the market cap.

What happens to my Amazon shares?

If you are already an Amazon shareholder, there is little you have to worry about in terms of how your holdings are managed. For every one share in Amazon that you currently own, you will automatically receive an additional 19 shares. 

So, if you currently hold 10 shares in AMZN, following the stock split you will own 200 shares. 

Subject to shareholder approval, with a vote due May 25, 2022, these changes are expected to take place on Friday, June 3, 2022, when shareholders receive the additional shares. At the start of trading on Monday, June 6, 2022, Amazon shares will begin trading under a new capital structure and at an adjusted price.

What will be the impact on Amazon stock?

The total value of a shareholder parcel of shares will remain the same at the time of the conversion, but in practice, the share price of a stock that announces a stock split often moves higher in the lead-up to that corporate action.  

Based on the closing share price following the trading session on Monday, March 14, 2022, the new share price would in theory trade at just shy of US$142 per share, compared with US$2,837 per share as it stands.

In addition, there is some speculation that a stock split may increase the likelihood that Amazon gets added to the Dow Jones Industrial Average. At the moment, AMZN shares are not part of the bellwether index that tracks 30 constituents, and that is largely due to the high share price. 

Under these circumstances, fund managers that track the Dow would be required to own AMZN shares in their portfolio.

Apple (NASDAQ: AAPL) and Tesla (NASDAQ: TSLA) are two of the most high-profile stocks where shareholders have benefitted from stock splits in recent times, with each rallying well beyond prior trading levels.More broadly, the stock split may also empower Amazon employees with more flexibility to manage their equity. The consequence of this is that it will help Amazon leverage its stock-based compensation to retain talent. The company recently more than doubled its base pay cap for US employees.

Which other stocks might consider a stock split?

When it comes to stock splits, the obvious starting point for potential candidates is the list of companies trading with a high share price. Some, like NVR, have never split their stock and may be unlikely to do so any time soon, while others like Tesla have only recently conducted a stock split.

Nonetheless, these are some of the US stocks with the highest prices as at the close of trade on March 14, 2022, US-time.

• NVR (NYSE: NVR) - US$4,622 per share

• Booking Holdings (NASDAQ: BKNG) - US$1,999.95 per share

• AutoZone (NYSE: AZO) - US$1,869.23 per share

• Chipotle Mexican Grill (NYSE: CMG) - US$1,471.97 per share

• Tesla (NASDAQ: TSLA) - US$766.37 per share

• BlackRock (NYSE: BLK) - US$697.53 per share

• O'Reilly Automotive (NASDAQ: ORLY) - US$674.82 per share

• Costco (NASDAQ: COST) - US$525.95 per share