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magazineTesla to split stock in five-for-one deal
Nasdaq-listed Tesla has announced plans for a five-for-one stock split after firm’s stunning run through 2020.
Investors lapped up the news sending shares in the electric car star roaring higher, adding close to $500 since the announcement and beyond $1,800 levels. Tesla stock ended 2019 at $418.33, yet now change hands for $1,835.64, based on the market close on 17 August.
This will be the first time Tesla has split its stock, which will effectively give investors five-times more shares that are valued at a fifth of the original price.
The decision is seen by some market watchers as a reward to its army of loyal retail investors who have supported the company through years of hype, hope, significant losses, and substantial scepticism.
Sceptics will see the stock split as little more than a marketing exercise designed to pump up an already inflated valuation. But while the change in the share count and valuation should make no difference to most investors, since it will not change the ultimate value of the business, it may make it easier for some retail investors to access the stock directly.
For example, if an ordinary investor is putting, say, £300 a month into equity investments via their ISA or SIPP, it would take them roughly five months to save enough to buy a single Tesla share, at current levels. Following the stock split, that same ordinary investor would be able to afford to buy one Tesla share per month.
This change, in theory, should allow a greater number of retail investors with limited resources to put their money into Tesla.
The Elon Musk-run firm was already the world’s most valuable car maker ahead of the latest spurt higher, worth as much as Toyota, Ford, General Motors and Fiat Chrysler put together despite selling only a fraction of cars compared to its long-established peers.
Yet Tesla remains the dominant force in the US and elsewhere for electric vehicles. Latest data from Clean Technica showed that Tesla’s Model 3 was the best-selling electric vehicle in the US during the first six months of 2020, with just over 38,000 Model 3 vehicles sold. That’s five-times as many units as the Chevy Bolt and 152-times as many as the BMW i3, according to the research.
The stock split will come into effect for investors on the Tesla register on 21 August, with trading in the new shares set to start from 31 August.
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