Tesla Splits Stock to Make Lofty Shares Attainable Again
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Tesla Inc. is splitting its richly valued shares in a 5-for-1 exchange, a move designed to make the stock less expensive for individual investors after the company became the world鈥檚 most valuable automaker.
Each stockholder of record on Aug. 21 will receive a dividend of four additional shares of common stock for each one they own, the electric car maker said Aug. 11 in a statement. The shares, which have more than quadrupled since March to close above $1,600 last month, pared a gain of as much as 7% early Aug. 12 to trade up 4.8% to $1,440.63 as of 9:46 a.m. in New York.
The split aims to capitalize on and support Tesla鈥檚 recent surge, which has pushed its market capitalization to more than $256 billion, exceeding the value of Toyota Motor Corp. and Ford Motor Co. combined. The massive rally for the shares has priced them out of reach for some smaller retail investors just as the EV industry is capturing their imagination.
鈥淎t a time where the appetite for the stock and overall EV story continues to gain momentum, I think it鈥檚 a smart move,鈥 said Dan Ives, an analyst at Wedbush who rates the shares the equivalent of a hold. Tesla is taking after Apple Inc., which Ives said other tech giants are likely to emulate.
Apple announced a 4-for-1 stock split after the close July 30, and retail traders have piled in to bet on further gains. Tesla will start trading on a split-adjusted basis Aug. 31.
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Tesla has been a favorite stock for day traders and other retail investors lately. At one point last month, nearly 40,000 Robinhood account holders added shares of the carmaker during a four-hour span. The surge has been a boon to other electric car companies, some of which have yet to actually produce a vehicle.
鈥淭he stock split is a recognition of the fact that the market is increasingly influenced by individual investors, including those looking to gain exposure to next-generation transportation,鈥 Ben Kallo, a Robert W. Baird analyst who rates Tesla the equivalent of a hold, wrote to clients.
Tesla鈥檚 gains have been partly fueled by speculation the company is likely to join the S&P 500 after it reported the latest in a string of profitable quarters. That would make the stock a must-buy for mutual and exchange-traded funds that seek to mimic the benchmark index.
The timing of the split may have come as a surprise to close followers of Tesla CEO Elon Musk鈥檚 Twitter feed. He was asked June 30 whether he had any thoughts about a Tesla stock split and said it was worth discussing at the company鈥檚 annual meeting, which isn鈥檛 until Sept. 22.
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