Tesla shares are about to be three times cheaper. The company announced on Friday that its board had approved a 3-for-1 stock split, its first split since August 2020.
The split would need to be approved by shareholders at the company’s annual meeting in August.
The automaker ended Friday at just over $696 a share. If the split took place today, its shares would be worth $232 each.
Don’t worry, Tesla shareholders, your bets will still be worth the same. You’ll be holding three times as many shares when it’s all done.
Companies divide their shares for a variety of reasons: Divisions can put their shares within the reach of smaller individual investors. It helps companies gain liquidity and divisions can create more demand for a company’s stock.
While well-heeled institutional investors don’t care about the company’s overall stock price, individual investors can be put off by high-priced stocks.
The growth of zero-fee trading apps, including Robinhood, E-Trade, and others, has made stock splits much more important in recent years.
Tesla said it took these factors into account — as did the employees who are paid in company stock.
“We believe the stock split would help reset the market price of our common stock so that our employees have more flexibility in managing their wealth, which we believe can help maximize shareholder value,” said the company. automaker in a regulatory document last Friday.
“In addition, as retail investors have expressed a high level of interest in investing in our shares, we believe the stock split will also make our common shares more accessible to our retail shareholders.”
Tesla announced plans for a split in March but did not announce a proportion. On Friday, the company noted that its shares are up 43.5% since the last stock split nearly three years ago, although the stock has fallen 30% since it announced the split plans. Might have planned to have a bigger share split if it hadn’t fallen so far.
This year, Big Tech and the broader market suffered from inflation and higher interest rates. But Tesla, in particular, has struggled this year in part due to CEO Elon Musk’s attempt to leverage his massive Tesla stake to buy Twitter.
He even sold $8.5 billion worth of Tesla stock to raise cash to use for the purchase, which helped push down Tesla’s stock price.
Other major tech companies have also recently announced stock splits to help increase their accessibility and attractiveness to ordinary investors. Amazon’s 20-for-1 stock split went into effect on Monday.
Alphabet, owner of Google, also approved a 20-to-1 split that will take effect in July. Shopify has a 10 for 1 stock split planned for the end of June, while GameStop has also proposed splitting its shares.
Tesla’s move may also aim to include him in the famous Dow Jones Industrial Average, which tends to include less expensive stocks. Apple, for example, announced a 7-for-1 stock split in 2014 and was listed on the Dow in 2015.
The division is no guarantee that it will be included in the Dow, but the index may want the world’s most valuable automaker and electric vehicle pioneer.
Tesla shares rose 1% in extended trading.
Tesla also announced that Larry Ellison, president of Oracle, has decided to step down from the board. Ellison has been on Tesla’s board since December 2018.
Stock splits of large companies have become very popular in recent years. But one company with an alarmingly high share price never split and said it never would: Berkshire Hathaway.
At $439,780 a share, Berkshire shares are off-limits to most individual investors. That’s why it offers its class B shares, which have been split in the past, for just under $292.
Source: CNN Brasil
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