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Tesla’s share value reaches a third of what it recorded last Wednesday; understand

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Tesla’s share value reaches a third of what it recorded last Wednesday;  understand

Tesla’s stock price is set to drop at Thursday’s opening bell, but not because of some Elon Musk tweet about electric vehicle demand, “full self-driving” features, SpaceX updates, silly memes or your legal battle with Twitter.

The electric car company completed a “3-for-1” stock split after closing last Wednesday, meaning a share today is priced at a third of what it was a day ago.

Tesla closed around $891 on Wednesday, meaning it should open at around $300 on Thursday morning.

Tesla approved the split in June, its second in two years. But before you start celebrating how a Tesla stock is now “cheaper”, remember that nothing changes with Tesla’s valuation.

The company is still worth more than $930 billion after the split. Shares continue to trade at a high multiple of more than 70 times earnings forecasts for 2022 — a big premium to valuations of traditional auto companies like Ford, GM, Volkswagen and Toyota.

And stocks are still down about 15% this year as investors worry about growing competition in the EV market from traditional automakers, as well as the many possible distractions from Musk. (SpaceX. The Boring Company. The Twitter takeover soap opera. The list goes on.)

The only thing the stock split has changed is that existing investors now own three times as many Tesla shares trading at a third of the price they ended at on Wednesday.

That includes Musk, the richest person in the world, with a net worth of around $264 billion, according to Forbes. Musk still owns approximately 15% of Tesla’s common stock.

Companies with high share prices often split their shares to make the cost of a share more affordable for individual investors. The logic is that some investors may be more inclined to buy a stock if it is trading at a lower price.

Amazon, Shopify, owner of Google Alphabet, and GameStop meme stockpile have made divisions in recent months.

Source: CNN Brasil

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