Tesla to divide its shares 5 to 1 at the end of August

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Tesla will split its stock for the first time in its history so more investors can afford to buy a stake in the electric car pioneer following a dramatic rise in its market value.The five-for-one stock split announced on Tuesday won’t change the value of Tesla’s business, but will automatically reduce its stock price by 80% when it is completed on August 31.

The sharp drop in the price per share creates a wider universe of potential investors and also often has the psychological effect of making a stock appear to be for sale. These factors often trigger rallies after the announcement of a split. For example, Apple’s stock price has jumped 14% since the iPhone maker disclosed a four-to-one split less than two weeks ago.

Now it looks like Tesla is about to benefit from the same phenomenon. Shares of the company jumped 6% to $ 1,459 in extended trading after news of the split broke.

The stock has risen 8,500% since its IPO

This is the first time Tesla has split its shares since the Palo Alto, Calif., Company went public at $ 17 a share ten years ago. Any investor who bought $ 10,000 worth of shares at this IPO price and would now own shares worth approximately $ 860,000.

Tesla shares have already tripled so far this year to give the automaker a market value of $ 256 billion – nearly three times the combined value of longtime rivals Ford Motor, General Motors and Fiat Chrysler.

The rapid ramp-up of Tesla’s inventory has been propelled by a growing belief that the company has solved its past manufacturing issues. It is also seen as a desire to broaden the appeal of its vehicles beyond the luxury niche with a series of new models.

Tesla was also able to reverse a long history of losses under the leadership of its eccentric CEO and co-founder, Elon Musk, to record four straight quarters of profit.

The company’s financial turnaround has qualified Musk for two lucrative awards valued at nearly $ 3 billion since May.

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