What Does Tesla’s Stock Split Mean for Investors?

This causes the total share count to go up and the stock price to go down. You can picture a stock split as someone cutting a freshly made pizza; cutting the pizza into slices doesn’t change anything fundamentally, it just makes the pizza easier to share and eat. Two Tesla board members, Ira Ehrenpreis and Kathleen Wilson-Thompson, were on the ballot this shareholder meeting and were re-elected. The Institutional Shareholder Services advised shareholders to vote against both of them because of the amount of borrowing Musk and other board members do as collateral of Tesla stock.

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It’s worth noting that Tesla’s retail investor following is quite vocal on social media message boards, and the company’s CEO, Elon Musk, knows it. Nominally reducing Tesla’s share price is an easy way to keep these everyday investors engaged. Stock splits usually trigger a rise in the price of shares, https://www.1investing.in/ according toa Nasdaq study that examined stock splits at large companies between 2012 and 2018. Even the mere announcement of a stock split yielded an average 2.5% price increase for a stock, the Nasdaq found; and a year after a stock split, shares saw an average price hike of nearly 5%.

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The percentages are calculated from adjusted stock prices, so the effect of the split itself is eliminated. If you want to make money from Tesla and electric vehicle stocks, AI is the technology of choice to help you do so. AI-powered investment kits from Q.ai take the guesswork out of investing.

1. Despite the fact that stock splits are largely superficial, tech companies that have seen stock prices soar rely on them to make trading expensive shares accessible for retail investors.
2. The company says that, unlike other manufacturers, it gives every employee the opportunity to receive equity.
3. Tesla announced in a press release on August 5th that the split will go into effect later in the month.
4. Tesla’s common stock plunged from its record high in November 2021 and fell to a low in June of this year, when it began to stage a strong advance, approaching $1 trillion in market value.
5. The company last month reported mixed second quarter earnings, which showed a decline in profit of nearly one-third from the previous three-month period in part due to production slowdowns at a factory in Shanghai amid COVID lockdowns.

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When a company’s stock splits, each existing share gets divided into the corresponding number of split shares. After Tesla’s stock split went into effect, each shareholder who owned one share now own three shares. Only time will tell how this Tesla stock split will impact the company’s market cap. It’s going to be interesting to see how the stock market reacts to Tesla in the next few months. Stock splits can be exciting and pain-free in the eyes of the investor.

Leadership teams typically pursue stock splits to manage the share price and to promote the liquidity and accessibility of the stock. Shares were trading at about $302 after the market opened on August 25th. In a proxy filing from earlier this year, Tesla claimed that the reason for the stock split was to offer every employee the option of receiving equity and to reset the market price. By resetting the market price, more employees and investors would have the opportunity to invest in Tesla once again. For this stock split, Tesla and its shareholders will have to take a few extra steps compared with last time, when the board simply announced its decision on Aug. 11, 2020, and swiftly split the stock on Aug. 31, 2020. In other words, consider the 3-to-1 stock split in regard to a stock priced at $300.

Musk also argued that despite Tesla being competitive with other EV producers, all EVs take market share away from gas powered cars, noting that every huge car producer is now shifting to EVs. Musk also touted that Tesla passed the milestone of making its 3 millionth vehicle in the past week as shareholders in the crowd applauded. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. This is a company focused on ramping up production at its Austin, Texas and Berlin-Brandenburg gigafactories, which were brought online earlier this year, as well as bringing new innovations to reality.

Senate’s Inflation Reduction Act of 2022, the significant tax credits could be available to Tesla car buyers. The existing credit was phased out after a carmaker sold 200,000 electric vehicles. But this bill would make the credit available to qualifying Tesla and General Motors (GM) vehicles. It’s nice to have at least the perception of getting something for nothing.

This is the lowest short float percentage dating back to when Tesla became a public company in 2010. If there’s a key takeaway from this figure, it’s that Tesla’s share price is predominantly being driven by buyers and sellers — not short-selling or short-covering. While things have certainly not gone Wall Street’s way in 2022, the investing community has still managed to find a bright light amid a gloomy situation.

Many experts assume the Tesla split will make the company’s stock more affordable to retail investors. Tesla (TSLA) has completed a 3-1 stock split for the company’s shares. A valuation like this arguably prices in both a return to strong growth in automotive sales and positive future financial contributions from nascent and untested businesses like an autonomous driving fleet and robotics. Given this frothy valuation, it may make more sense for investors to give themselves a big margin of safety.

Lastly, Tesla’s shareholders and prospective investors should understand that stock split-mania is a short-term event. Although investors are hyped up at the moment, a stock split doesn’t mask the fact that one of the most widely held stocks on the planet is facing a slew of headwinds. Out of the more than 200 stock splits announced and negative balance on credit card enacted through the first eight months of the year, arguably none has been more anticipated than that of electric vehicle (EV) manufacturer Tesla (TSLA -4.08%). The world’s most valuable automaker announced its intent to conduct a split in June, and with shareholder approval, it moved forward with a 3-for-1 stock split on Aug. 25, 2022.