The day has arrived. Stock in the electric vehicle pioneer
divides 5 to 1 after the market closes for trading.
Tesla shares (ticker: TSLA) will open on Monday at around $ 450 – a fifth of the place where the stock is currently trading. The calculations and numbers associated with the stock split aren’t usually very high, but Tesla is the exception.
With Tesla stock, the numbers are always part of the story.
Shares have risen 958% in the past year to Thursday’s closing price. The stock has gained 445% year-to-date, crushing the comparable gains of the
Dow Jones Industrial Average
and leave the company with a market capitalization of over $ 417 billion.
Since the split was announced, Tesla shares have gained 66%. This gain makes this week’s 11% jump look small. (Tesla shares were up 1.9% by late morning on Friday.) The numbers since the split was announced are incredible to see. Tesla might appear to be worth around $ 160 billion more because it trades at an absolute lower price.
This logic puts credulity to the test.
That’s not all the stock split, however. Tesla’s earnings estimates and analysts’ forecasts for the stock price rise. Investors are optimistic for September 22, when Tesla will dedicate a day to explaining developments in battery technology. Investors are hoping to have a word on costs, how far Tesla might be able to extend the range of its vehicles on a single charge, and how long its batteries will last.
Battery day is the next big factor after the split that could move the stock. What happens after the split itself is a guess.
Few experts have predicted a gain of more than 60% in the wake of the stock split news on August 11. Investors might have racked up Tesla shares before the split in anticipation of increased demand from individual investors on Monday.
If demand materializes, Tesla shares could appear next week. If the pop does not occur and traders exit recent positions, then stocks could fall.
Another wild card for Tesla stock traders is the potential inclusion of the stocks in the S&P 500. After Tesla reported earnings under generally accepted accounting principles in its final quarter, the stock qualified for the index.
Tesla Bears have questioned the quality of Tesla’s earnings. They point out that the sale of regulatory credits – earned by producing more electric vehicles than regulators demand, to automakers that produce less – has led to stated profitability. That’s right, but everyone who follows Tesla knows he sells credits. And the profit was posted during the pandemic, as auto sales in the United States plunged.
This bearish argument, at this point, feels like it’s spitting in the wind. The S&P Index committee probably doesn’t care about the regulatory credit debate. If they do, investors won’t hear about it. The decision whether or not to include Tesla is entirely discretionary.
Tesla most likely enters the index. It is America’s seventh most valuable business. Thursday Tesla overtook
(V) in terms of market capitalization. The next step is
Passing Berkshire would be quite a blow to the Tesla Bulls. Value investors such as Berkshire’s Warren Buffett are struggling with the valuation of Tesla. Tesla Bulls believe the company is a so-called platform company with new technology and plenty of opportunity for profit growth.
Platform companies are those like
(AMZN), with several companies that allow third parties to prosper using their technology. In Tesla’s case, this includes solar power and energy storage. Later, robotaxis could join the list.
Eclipsing Buffett would be another feather in the bulls’ cap.
Write to Al Root at [email protected]