Tesla has announced that it will be initiating a 5:1 stock split on August 31. This comes to no surprise as at the time of the announcement the stock was currently nearing $1400 a share. With new trading platforms making trading easier for millennials and Gen Z’s alike, the company figured it would be in its best interest to make the stock cheaper for its potential investors. Although, at the same time many brokerages offer fractional shares which essentially eliminates the need for a split. Time will tell if this stock split is more of a marketing stunt than anything else.
Tesla’s monthly return via Robinhood.
What is a stock split?
Tesla is banking on the fact that the buying volume of its stock is low due to its exorbitant price value of almost $2200. At an all-time high analyst are scrambling to figure out if this is just a fad or a real evaluation of the company. This stock split will lower the price of an individual share by almost 80%. If the price remains stable until September one share will be worth an estimated $440. As for previous investors, they will be given more shares of the company based on their previous holdings. For example, if one investor had 100 shares of the company, on September 1st he will now have 500 shares.
As for Tesla’s volatility, it is almost impossible to tell how this change will affect its share price long term. Since the announcement, the share price has increased by $600. Is this just a quick grab at more money from young investors who suffer from FOMO? Probably. Will it work? Time will tell.
Tesla’s stock split also comes before its potential inclusion into the SP500. With its second-quarter being its 4th profitable quarter, Tesla has met all the requirements for the inclusion. This also may also be a partial reason for its upcoming stock split. Many index funds that track the SP500 are soon going to be buying large volumes of the stock and buying them fast. With a 5:1 split, there will be more tradable shares, and at a lower price. Personally, I am watching Tesla’s stock rise and fall from the sidelines, as are many investors. The volatility of this stock may be higher than its returns this year, which is a turnoff for a lot of investors.
Shown above is Tesla’s checklist for ts inclusion into the SP500. Now all 4 categories are marked as completed. https://a57.foxnews.com/static.foxbusiness.com/foxbusiness.com/content/uploads/2020/07/931/523/SP-tesla-3.png?ve=1&tl=1
Thanks for reading, and this has been the first entry of Too Much Tesla. Not only will this blog be covering recent market movements of Tesla’s stock, but this blog will also be keeping pace with its new car innovations, Giga Factories, software, Neuralink, and even Space X. Stay tuned for all the latest news about the future of cars, space, and software. Think Tesla!
I appreciated your explanations of a stock split because I’ve never really followed the stock market or even understood how it works. It seems that Tesla is only growing in popularity, since I constantly see articles about Elon Musk. I wonder if the hype will ever die down or if Tesla’s popularity will only grow with time? Elon Musk is a brilliant man who is always coming up with new ideas so I’d assume their popularity will keep skyrocketing. Have you ever invested in stock?
I had heard about the stock split, but never understood what it actually meant. With stocks being so volatile, I cannot imagine this would go well, at least as well as planned. This is a very smart marketing move now, though, because as you said, young investors will eat this up just to say the own Tesla stock. Also, what effect do you think joining the S&P 500 would have on Tesla’s stock?