Tesla plans a 3-for-1 stock split to make shares "more accessible"
Tesla on Friday said it is planning a 3-for-1 stock split, partly to make its shares "more accessible" to retail investors. The announcement comes after the company's shares shed 42% of their value this year.
The electric-vehicle maker's shares rose 1.1% in after-market trading, rising $7.31 to $704. The company announced the stock split in a securities filing on Friday.
Tesla's shares have tumbled this year amid economic pressures — such as the COVID-related shutdown of Shanghai, which crimped production at a Tesla factory — as well as Elon Musk's $44 billion takeover offer for Twitter. That deal has put pressure on Tesla's stock because Musk has tapped his holdings in the EV company to provide financing for the social-media purchase.
Stock splits don't change the value of a company. For instance, investors in a company with a stock trading at $100 that does a 2-for-1 stock split will simply own two stocks worth $50 each — the value of their two new shares are the same as their prior single share. Yet companies that engage in stock splits often outperform the market, according to Reuters, citing Bank of America research.
That could be due to investors buying shares in a company after a split because of the perception that the stocks are more affordable. Companies whose stocks have risen to high prices, such as hundreds or thousands of dollars a share, often turn to stock splits to make the securities more accessible for individual investors.
Tesla noted that its stock had soared after its last stock split, in August 2020. Between that date and June 6, the company's shares had jumped 43.5%, it noted in the regulatory filing.
"While this value appreciation has led to our employees benefiting enormously through the years, we want to make sure all employees, no matter when they join, have access to the same advantages," the filing said.
It added, "In addition, as retail investors have expressed a high level of interest in investing in our stock, we believe the stock split will also make our common stock more accessible to our retail shareholders."
The regulatory filing also said that Oracle co-founder Larry Ellison won't run for re-election on its board.