Tesla hopes new investors will embark after stock split

NEW YORK (AP) — Unlike its own cars, Tesla stock is about to drop.

Tesla will split its stock 3-1, so after Tuesday’s close, investors will receive two additional shares of Tesla stock for each share they own as of August 17. Trading begins Wednesday.

A stock split does not increase the company’s value or profitability. Tesla will join stock market stalwarts Amazon and Google parent company Alphabet this year in splitting high-priced shares. Even meme stock darling GameStop has gone through a stock split.

Reason for stock split

Stock splits are used when a company’s share price is too high for retail investors to buy individual shares, or when a company wants to get more shares on the market to facilitate trading.

If new investors push the price up, the employees who hold shares in the company can benefit as well. With the stock price falling, it should be easier to sell the stock.

Tesla shares were trading at over $1,000 when Tesla announced its stock split intentions in March. This is a bit steep for most retail investors. Some brokerages allow investors to buy a portion of their shares, but not all of them.

A report by BofA Global Research, published in March, found that stock split companies tended to outperform the broader market at three, six and 12 months after the split was announced. I have. Since 1980, his 12-month performance for companies that have split stocks has more than doubled his for the S&P 500.

What’s going on with Tesla’s stock price?

Tesla shares closed at $889.36 on Tuesday, down about 16% for the year. Prices around $296 are still far from cheap, but could entice more investors to buy the stock.

According to Forbes, any investor in Tesla will have Elon Musk, the company’s wayward CEO who has managed to make Tesla the world’s most valuable automaker and himself the richest man in the world. bet partially on

But with Musk behind the wheel, the ride can be bumpy. In April, Musk signed a deal to acquire social media platform Twitter. Some Tesla investors sold their stakes, worried that Mr. Musk would be distracted from running Tesla if the deal went through. The stock fell to $620 in late May.

Since then, Musk has changed course and wants out of the deal. The controversy will bring him to court in October. Tesla’s stock began to rebound in July, boosted by better-than-expected second-quarter earnings and an overall uptrend in the stock market.

Have other prominent companies split their shares?

Alphabet, the parent company of Amazon and Google, split their shares 20 to 1 each in the past few months. Both companies were embroiled in a broad rally of big tech stocks after the initial shock of the pandemic, with their shares soaring above $2,000.

Alphabet’s stock has risen 2% since the stock split took effect on July 18, but is still down about 20% this year. Google’s revenue grew the slowest The second quarter biennial marks a shift in the tailwinds driving big tech companies in challenging new directions during the pandemic.

Amazon shares are up almost 9% since the split went into effect June 6, but like Alphabet the company faces challenges The company’s stock is down nearly 20% year-to-date. Consumers are changing their behavior, spending more on services and less on goods. Like many companies, Amazon has seen its own costs rise significantly.

Even the so-called meme stock, GameStop, which has bounced back somewhat after surging to ridiculous levels last year, has decided to do a stock split. In GameStop’s case, however, it was the individual investors who pushed the stock up in the first place.

GameStop’s stock closed at $33.56 on Tuesday, down about 6% since the split took effect, partly reflecting the market’s decline in recent days.