Business News

Tesla Investors Clear 3-for-1 Stock Split as Shares Rebound

Tesla Inc. shareholders approved a three-for-one stock split on Thursday as the electric-vehicle maker seeks to attract an even larger number of retail investors amid a furious rally since late May. 

Published: August 5, 2022 at 6:36 AM GMT+8
Author: Esha Dey
Original Source: www.bloomberg.com



The split will bring Tesla’s shares down to the $300 range, but the Austin, Texas based-company did not immediately specify as of when it will take effect. Tesla had first announced its plan on March 28 via a tweet.

The four-month lag between announcement and vote is proving to be beneficial: A rally in growth stocks has brought the Nasdaq 100 Index up nearly 20% from a June low, with Tesla outperforming both the tech-heavy index and the broad S&P 500 Index with a gain of nearly 50% from a late-May low.

Tesla rose 0.3% in post market trading to $928.55 as of 6:34 p.m. in New York. The stock has been on an upswing over the past month, rising 37% since the end of June as of Thursday’s close.

Tesla’s recent rebound -- it posted a 32% gain in July for its best month since October -- comes on the back of resilient second-quarter results and a bit of a lift from the climate change bill from the Biden Administration, which aims to boost the use of clean energy through a series of tax incentives.

Most of the risks that weighed on the company earlier this year still linger, with supply-chain disruptions far from sorted, tensions between the US and China rising, and Elon Musk involved in a potentially lengthy and costly legal dispute with Twitter Inc. Moreover, recent high profile stock splits have failed to give a meaningful boost to other giants including Alphabet Inc. and Amazon.com this year.

For Tesla, this will be the second share-split in less than two years. The company had a five-for-one stock split in 2020, prompting a 60% surge in the share price from the day of the announcement to the execution date. The company already has a fairly strong retail investor following, often making it the stock with the most buy orders on Fidelity’s retail trading platform.

Even though stock splits do not impact the business model of a company, they bring in a sense of affordability by lowering the price of the shares, especially for mom-and-pop investors, market watchers say.

“Owning the whole share can be less complicated and more empowering, and these companies know that,” said Callie Cox, eToro US investment analyst. “There’s clearly an underlying desire in this market for any company to make its stock as accessible as possible. And so far, investors have responded to that.”

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