Tesla is the latest company to announce a stock split. This past week, the electric car maker announced that its Board of Directors had approved a five-for-one stock split of its common stock. The news sent shares soaring after the announcement, and the momentum has kept going all through the week.
The Palo Alto, California-based company is offering the split as a stock dividend to provide more accessibility to its employees and investors. As of August 21, 2020, every Tesla stockholder will have four additional shares of common stock for each share that is held. Distribution of shares will take place on August 28, 2020, after the trading has closed. On August 31, 2020, shares will begin trading on an adjusted basis.
The fundamentals of the stock remain unchanged. The split is more attractive for retail buyers and allows them to purchase fractions of a share. Whether an investor owns a full share or five split stocks, the value is the same. Investors on trading platforms like Robinhood find the stock split appealing because it makes it easier for them to buy into more expensive stocks.
Tesla stock has done well over the past year, trading at more than 500 percent higher and reaching more than $1,600 per share. During trading after the announcement on Tuesday, Tesla shares stood at $1,374.39. By closing on Wednesday. Tesla stocks gained more traction and closed at $1,560 a share. By the end of the week, shares were trading at $1,650.71.
Emmanuel Rosner, of Deutsche Bank, said: “While stock splits don’t create value per se, and institutional investors are typically largely indifferent to them, Tesla’s stock price reacted very positively…”
Rosner went on to say that the stock split “lowers the bar for small investors.”
Tesla isn’t the only major company in recent weeks to announce a stock split. On August 31, Apple announced its own four-for-one stock split.