A stock split like Tesla stock can be tempting for investors because it allows them to buy what was a previously more expensive stock at a much cheaper price. Make sure you do your research, check stock charts for the right time to buy, and focus on companies with top fundamentals how to buy ethereum on metamask that are leading price performers in their industry group. Investors who bought Tesla stock precisely one year ago are down by 10% on their purchase price today. However, had you waited a few months and bought in January, you would have doubled your money by now!
- There seems to be plenty of demand for Cybertruck deliveries to ramp up as quickly as production can manage.
- You might be wondering what impact Tesla’s stock split could have on its day-to-day operations, balance sheet, or operating income statement.
- Investors who bought Tesla stock precisely one year ago are down by 10% on their purchase price today.
- There was a similar occurrence last year when programmatic advertiser The Trade Desk unveiled its 10-for-one stock split and chipmaker Nvidia detailed plans for a four-for-one stock split.
When you purchase stock in a company, you are essentially buying a piece of the business, so you want to make sure the business can attract profits in the future. Nothing is set in stone until shareholders vote at the upcoming shareholder meeting. Last year’s meeting took place in October, so we are probably a few more months away from a final decision. Excessive stock splitting has been seen at market tops in the past, especially when tech stocks topped in 2000.
Do stock splits raise the stock price?
It’s also a way of encouraging higher average trading volume, which CEOs like Elon Musk understand can keep Tesla at the heart of the conversation on online message boards and within investing communities. Tesla also expects that reducing the share price through a stock split will make its common stock more accessible to retail investors, which it sees as a positive development. People prefer to buy and sell an even number of shares, and they like to pay within a particular range if possible,” Stovall said. Tesla announced in a press release on August 5th that the split will go into effect later in the month. Tesla shareholders will receive a dividend of two additional shares of common stock that will be distributed after close of trading on August 24, 2022. Trading on the new stock split-adjusted price will begin on August 25th.
- “Retail investors are a very important cohort for Tesla and today’s stock split is an acknowledgment of that fact.”
- Still, considering its past success and meteoric productivity increase, the stock is essential to any growth investor’s portfolio.
- The existing credit was phased out after a carmaker sold 200,000 electric vehicles.
- When a company’s stock splits, each existing share gets divided into the corresponding number of split shares.
- A stock split, in itself, won’t lead to millions of dollars in your account overnight.
Tesla has a lot of room to expand its business over the coming years, but the short term could get a bit bumpy. For starters, the U.S. consumer continues to digest a soaring cost of living. Housing and rent prices keep rising, and Americans have more debt than ever. It’s not a huge leap to question the consumer’s appetite for new vehicles, considering they cost tens of thousands of dollars. The stock opened at $302 and closed at $296.07 as the split allowed investors to get two additional shares for each they owned as of Aug. 17. Like most auto stocks, Tesla is contending with semiconductor chip shortages and generalized parts shortages predominantly caused by the COVID-19 pandemic.
However, just how much of a premium it deserves is the question that investors will have to weigh. But sometimes a fast series of stock splits may be a warning sign to sell. From 2012 to 2021, stocks in the S&P 500 rose roughly 12% on average in the year following their stock splits according to data from Dow Jones. Those same figures showed that rates of stock splitting in the S&P 500 have ticked bullish rectangle pattern up in the last few years to their highest levels in nearly a decade. Usually any dividends after a stock split also will be reduced proportionally per share to account for the increase in shares outstanding. There’s no question that retail investors, who’ve played a big role in pushing Tesla’s valuation to nearly $1 trillion, are the biggest winners of the company’s pending stock split.
Tesla Stock Split to Occur Aug. 24 After Shareholders Approve Plan
The shares are to be split on a 3-for-1 basis, meaning investors will receive an additional two shares for each one they already own. Investors received two additional shares for each share they held prior to the split. Each of the three shares will be valued at a third of the original price, leaving the total value of a shareholder’s stock unchanged. TSLA stock has been on an upswing since last month, posting its biggest gains since October 2021, and the announcement of the stock split does not take effect immediately.
The electric-vehicle maker became the latest mega-cap company to divide its highly priced shares this year in a bid to make them more accessible to investors. Companies like Tesla make stock splits to make their shares more affordable for average investors. And while many investors are familiar with stock splits, some want to know the meaning behind Tesla’s decision, as well as how the company’s stock split will affect their own shares. Pay attention to the key financial metrics, and then go beyond the numbers to determine if the company deserves a spot in your portfolio. If you do your research now, you can position yourself to attract market-beating returns that can get you one step closer to building wealth in the stock market over time. A stock split will make Tesla’s four-figure stock price more affordable for the average investor.
When the Tesla stock split will take place
With legacy automakers spending tens of billions on EV research and product development, it’s probably going to take more than short-term stock-split euphoria to hold shares at such a premium valuation. Although Tesla share price has been on fire for more than a decade, there are a number of red flags that suggest this amazing run-up isn’t sustainable. For example, auto stocks are traditionally valued at a single-digit or very low double-digit forward-year price-to-earnings ratio. As for Tesla, investors are having to pay an aggressive multiple of 58 times Wall Street’s forecast earnings for 2023.
Tesla is posting impressive growth
That means it won’t impact the competitive advantages Tesla has ridden to one of the largest corporate valuations in the world. Based on Tesla’s closing price of $919.69 on August 16, a 3-for-1 stock split would reduce its share price to around $306.56 a share. Perhaps the most pertinent piece of data for investors to know is when, exactly, Tesla’s stock split will take place. The answer is exactly one week from today, on August 25, 2022 prior to the market open. Tesla must navigate internal and external challenges, fighting higher inventory levels in an economy where consumers might pull back on expensive purchases. Additionally, Cybertruck production could be a journey itself over the coming years.
After the stock split, all investors can buy a whole share of Tesla for a cheaper price. While Tesla undeniably holds a leadership position in the EV space, its stock remains a relatively high-risk investment. The company has certainly done a great job of proving doubters wrong thus far. A regulatory uk reits filing made by Tesla (TSLA 0.55%) at the end of March revealed that the electric vehicle (EV) leader plans to carry out another stock split. Exact details about the plan were scarce, but the filing did indicate that the move would pave the way for CEO Elon Musk’s company to begin paying a dividend.
Behind the scenes of a stock split
Stock splits increase the number of outstanding shares while simultaneously decreasing the cost of each share. Tesla shareholders approved the new stock split at the annual shareholder meeting in Austin, Texas. The company first announced the proposed split several months ago via a March 28 tweet.
Does this stock split affect Tesla’s business in any way?
While that’s impressive in its own right, over the past five years, the stock has climbed 1,890%, and over the past 10, they’ve gained an eye-popping 14,000%. Despite this turmoil, investors have a natural tendency to seek out Wall Street’s silver lining. Since the beginning of the year, dozens of companies have announced and/or enacted stock splits. For this stock split, Tesla and its shareholders will have to take a few extra steps compared with last time, when the board simply announced its decision on Aug. 11, 2020, and swiftly split the stock on Aug. 31, 2020. A stock split divides existing shares into smaller pieces for greater accessibility.
Even with Tesla diversifying some of its sales into energy storage and solar panel installation, this is a nosebleed premium bestowed by the investing community. You’ll note that Tesla’s market cap doesn’t change despite the share price and outstanding share count being adjusted. Out of the more than 200 stock splits announced and enacted through the first eight months of the year, arguably none has been more anticipated than that of electric vehicle (EV) manufacturer Tesla (TSLA 0.55%). The world’s most valuable automaker announced its intent to conduct a split in June, and with shareholder approval, it moved forward with a 3-for-1 stock split on Aug. 25, 2022. While stock splits don’t influence a company’s value, it makes it more affordable to retail investors.