Tesla Shares Soared After The Announcement Of A Five-For-One Stock Split
Electric car maker Tesla Inc (NASDAQ: TSLA) announced its intention to split shares Five-for-One (divide one share by 5), after which the company's shares rose 7% and traded at $1,475 in the postmarket.
Tesla shares are among the most expensive on wall street today. At the same time, Elon Musk's company said in a press release that it aims to make its shares more accessible to employees and investors. Split is designed to solve this problem. In this way, the company makes its shares more attractive to retail investors, including "physicists" who make small transactions.
Against the backdrop of the coronavirus pandemic and worldwide quarantine, shares of car manufacturers such as General Motors (NYSE: GM) and Ford Motor Company (NYSE: F), declined, while Tesla shares, on the contrary, have increased by more than 200% since the beginning of the year.
The split will take place on August 28, when Tesla stockholders will receive four additional shares, while they will be traded with a price adjustment starting on August 31.
It should be noted that the last 4-to-1 split on wall street was announced by Apple Inc (NASDAQ: AAPL) at the end of July, which was the first division of the iPhone maker's shares since 2014.
In recent years, stock splits on wall street have become rare: only three companies in the S&P 500 index have announced splits in 2020, compared with an average of 10 splits per year over the past decade.
Tesla is more popular among individual investors than among institutional investors, who have shunned it in recent years. Tesla was able to cope with the crisis caused by the virus pandemic this year, recently reporting a profit for the second quarter. At the same time, it was able to compensate for temporary downtime at its factories by cutting costs and maintaining stable supplies, thus overcoming the obstacle that prevented its inclusion in the S&P 500 index.
The split in Tesla shares should not affect the potential decision to include the company in the S&P index. It also won't cheapen Tesla's valuation in terms of the actual profit it brings to investors. According to Refinitiv, the company's shares are currently trading 112 times higher than expected earnings for the next 12 months. By comparison, GM is valued at eight times the expected profit, while Ford is valued at 45 times.
Tesla, Inc. (“Tesla”) announced today that the Board of Directors has approved and declared a five-for-one split of Tesla’s common stock in the form of a stock dividend to make stock ownership more accessible to employees and investors. Each stockholder of record on August 21, 2020 will receive a dividend of four additional shares of common stock for each then-held share, to be distributed after close of trading on August 28, 2020. Trading will begin on a stock split-adjusted basis on August 31, 2020.
Certain statements, including, without limitation, statements regarding the expected timing and impact of the stock dividend are “forward-looking statements” that are subject to risks and uncertainties. These forward-looking statements are based on management’s current expectations. Various important factors could cause actual results to differ materially, including the risks identified in our filings with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. Tesla disclaims any obligation to update this information.