Tesla shareholders agreed to a 1:3 stock split in an effort to attract more retail investors. Quoting Bloomberg, Friday (5/8/2022), the stock split will make Tesla’s shares drop to the range of US$300, but the Austin, Texas-based company did not immediately specify when the stock split period would take effect. Tesla first announced its plans on March 28, 2022 via Twitter.
The four-month lag between the announcement and the vote has proven beneficial as the rally in tech-listed stocks has brought the Nasdaq 100 Index up nearly 20 percent from its June low, with Tesla outperforming the tech index and the S&P 500 Index by nearly 50 percent gain from late May lows. .
Tesla shares were up 0.3 percent in regular post-market trading to $928.55 as of 6:34 p.m. New York time. The stock has seen gains over the past month, up 37 percent from late June to Thursday’s close.
“Tesla’s stock split timing looks perfect. The market seems to be heading in the right direction,” said Roth Capital Partners analyst Craig Irwin.
Tesla’s recent rebound, which posted a 32 percent gain in July 2022 for its best month since October 2021, colored tough second-quarter results and a slight improvement from the Biden Administration’s climate change bill, which aims to increase clean energy use through a series of tax incentives. .
Most of the risks that weighed on the company earlier this year remain, with supply chain disruptions far from over, tensions between the US and China rising, and Elon Musk embroiled in a potentially lengthy and costly legal dispute with Twitter Inc.
Additionally, recent stock splits from high-profile companies failed to provide any meaningful boost to other tech giants including Alphabet and Amazon this year.
For Tesla, this stock split will be the second share split in less than two years. The company conducted a 1:5 stock split in 2020, driving a 60 percent jump in share price from announcement day to execution date.
Tesla already has a fairly strong following of retail investors, often making it the stock with the most buy orders on retail trading platform Fidelity.
Although stock splits have no impact on a company’s business model, they do bring a sense of affordability by lowering stock prices, especially for investors from the older group.
“Owning an entire stake can be easier and more empowering, and these companies know it. There is 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,” said Callie Cox, investment analyst at eToro US.