Tesla announced on August 11 that it intends to carry out a 5: 1 stock split at the end of August after the company’s board of directors voted to make the shares of its shares more accessible to employees. and retail investors.
The number of shares multiplied by five and the share price was adjusted by falling by 80% in value per share. The valuation of the company is still the same, but the number of shares available for trading is now greater. Thus, the price per share had to be adjusted to maintain the same market capitalization.
In reality, the TSLA stock split is unlikely to have a massive impact on the share price. The act of splitting a stock does not change the value or market capitalization of an entity. It just makes stocks more accessible to small investors. In a list of TSLA’s top ten owners, only two are individual shareholders: Elon Musk at 20.8% and business mogul Larry Ellison with 0.32%.
The other eight places are held by large companies that hold significant stakes in the shares of the company. The largest is Baillie Gifford, who owns a 1.26% stake in the electric automaker. The stake is $ 5.2 billion, Bloomberg reported.
Tasha Keeney of ARK Invest clarified her thoughts regarding the split on an episode of Yahoo Finance’s The Ticker at the end of last week.
“A stock split now, especially with split stocks, shouldn’t have such a big impact,” Keeney said. “But of course you might see price appreciation from investors who misunderstand it, thinking it could be cheaper. ”
Tesla benefited immensely from the growth in retail investment in 2020, which increased exponentially in 2020, according to a report by News from the United States. With toll-free brokerage accounts easily accessible via a smartphone, many individual investors get their first taste of trading.
Anthony Deiner of Webull Financial, a commission-free trading platform, says the lack of entertainment due to the COVID-19 pandemic may have encouraged some people to use the financial market as entertainment.
“Younger and first-time investors flocked to open free, app-based brokerage accounts long before anyone in the United States heard it. [of the pandemic]Said Deiner. “However, the forced foreclosure, lack of sports, concerts and other forms of entertainment events have certainly opened up trade and investment to a much larger market than ever before.”
Sites like Robinhood and Charles Schwab have reported a slew of new brokerage accounts on their platforms, showing that investing in retail is healthy as life continues to change during the pandemic.
At the time of writing this article, TSLA stock was up 3.46% pre-trade at $ 458.00 per share.
Disclosure: I do not own any shares of TSLA and do not intend to take any positions within 72 hours.