Tesla Stock Split: Buy Before Or After Split? Investor’s Business Daily
If there’s a key takeaway from this figure, it’s that Tesla’s share price is predominantly being driven by buyers and sellers — not short-selling or short-covering. While things have certainly not gone Wall Street’s way in 2022, the investing community has still managed to find a bright light amid a gloomy situation. While fractional shares are becoming more popular, many investors are still intimidated by a high price per share or prefer to own whole shares. With Tesla being the sixth largest company in the world and the U.S EV market relying heavily on its success, there’s justifiably been plenty of discussion about this stock split. So we’re going to look at the Tesla stock split to determine if it changes the value of the stock, and give you what you need to know about it moving forward.
- In January, Tesla has trimmed China vehicle prices on the Model 3 and two Model Y variants and then on Tuesday slashed Model Y prices in many European countries.
- Reverse stock splits can be used to reduce the number of shares outstanding.
- While the company does offer a sizable EV production advantage, both new and legacy auto stocks are catching up to Tesla when it comes to battery range.
- “I’m half Canadian, so maybe.” Tesla currently has plants in California, Berlin, and Shanghai.
- Shares surged from an April 1999 price of 21 to hit an all-time high of 200 on the first trading day of 2000.
There’s also CEO Elon Musk, who the retail investor community has largely come to embrace as a visionary. Musk has overseen the introduction of four currently sold EV models, and has helped diversify his company to include energy storage products and solar panel installation. If you hold an options contract of a split stock your contract will be recalculated so that it’s not affected by the split.
Why Tesla Is Splitting its Shares?
It’s nice to have at least the perception of getting something for nothing. But a stock split doesn’t necessarily mean that anybody’s getting anything of additional value with their money. The combination of Tesla’s rising EV production, industry-leading https://forex-review.net/ battery technology, and the potential of autonomous driving results in an estimated share price of $2,000 by 2027 in Wood’s base case. Given Tesla’s current share price, Wood is calling for a nearly 800% increase within the next few years.
Should you invest in Tesla stock?
Perhaps the most pertinent piece of data for investors to know is when, exactly, Tesla’s stock split will take place. The answer is exactly one week from today, on August 25, 2022 prior to the market open. Stocks can and often do move higher after initial splits, particularly when they happen early in a bull market. But problems occur when companies enact multiple big splits — say, a 2-for-1 and a 3-for-1 — within a one- to two-year period. Those interested in the Tesla stock split should note that shareholders approved a 5-to-1 split in August 2020.
Tesla Stock: Pricing Inversion
Despite the board’s discouragement, shareholders passed a proposal to increase investor’s power in nominating directors on the board. Shareholder proposals to allow board directors to serve two-year terms and to eliminate supermajority voting requirements did not pass. Investors also considered on a range of shareholder proposals that Tesla encouraged them to vote against. Proposals focused on improving corporate governance, including shareholder propositions to require diversity reporting on the board of Tesla and mandatory disclosure of political lobbying did not pass. Other investor proposals not supported by Tesla’s board including allowing employees to form a union, requiring Tesla to report its progress in eliminating racial and sexual discrimination, and disclosing water risk all failed.
What Does Tesla’s Stock Split Mean for Investors?
These stockholder proposals follow Tesla’s removal from the S&P 500 ESG index in May. Tesla lost its place on the index, which lists companies that meet the bar of responsible environmental, social, and governance practices, largely due to racism allegations at Tesla’s gigafactories. In February 2022, the California Department of Fair Employment and Housing brought a lawsuit against Tesla for race discrimination and harassment at the company’s California factory.
Stock Split Watch: Is Tesla Next?
But perhaps Wood’s most bullish stance revolves around electric vehicle (EV) company Tesla (TSLA 0.15%). Wood has been a longtime supporter of Tesla’s eccentric CEO Elon Musk who shares his vision of the company spanning beyond EV production. Tesla shares were up about 1.8% Wednesday morning in anticipation, even though the stock split won’t change anything fundamental about the company’s stock. This has been a challenging year in every sense of the word for Wall Street professionals and everyday investors. The cherry on top is the Federal Reserve is aggressively hiking rates into a steeply correcting market for the first time ever. But the far bigger worry here is that Musk’s forward-looking statements, which play a key role in buoying Tesla’s pricey valuation, have a history of missing the mark.
Alphabet (GOOG)
After the 3-to-1 split, Tesla’s shares were trading at about $302, a third of where they stood prior to market open. Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity luno exchange review intact, from our research and data to our policies on content and your personal data. However, trading became volatile in recent weeks as investors weighed whether or not Tesla would benefit from the bill’s passage. If you’re new to IBD, consider taking a look at its stock trading system.
But sometimes a fast series of stock splits may be a warning sign to sell. Excessive stock splitting has been seen at market tops in the past, especially when tech stocks topped in 2000. QCOM stock skyrocketed more than 840% after the announcement of that first stock split in 1999. Shares surged from an April 1999 price of 21 to hit an all-time high of 200 on the first trading day of 2000. A 3-1 stock split could ensure more mom-and-pop investors can own a piece of the electric vehicle giant. The 3-1 split comes on the heels of even more good news for Tesla shareholders.
Shares were trading at about $302 after the market opened on August 25th. In a proxy filing from earlier this year, Tesla claimed that the reason for the stock split was to offer every employee the option of receiving equity and to reset the market price. By resetting the market price, more employees and investors would have the opportunity to invest in Tesla once again. While a stock split theoretically should not alter the valuation of all shares outstanding, lowering the price per share may attract more potential buyers, boosting the stock’s aggregate valuation somewhat. An outside proposal that failed would have enabled shareholders who held 3% or more of Tesla’s stock for at least three years to have a say in director nominations.
The preliminary tally indicates that seven of them were rejected, as recommended by management. However, the preliminary results indicate that Proposal Six on the agenda, to increase shareholders’ ability to nominate competing candidates for board seats, passed. Investors received two additional shares for each share they held prior to the split. Each of the three shares will be valued at a third of the original price, leaving the total value of a shareholder’s stock unchanged. Based on Tesla’s closing price of $919.69 on August 16, a 3-for-1 stock split would reduce its share price to around $306.56 a share. Usually any dividends after a stock split also will be reduced proportionally per share to account for the increase in shares outstanding.
Tesla’s stock will also keep a Morningstar Rating of 3 stars following the split, but at a slight premium of 14% as of August 23, which is still within a range that Goldstein views as fairly valued. Alphabet presently dominates the global search engine market since Google’s share is about 80%, and the company brings in billions in revenue through Youtube’s advertising arm. Still, on the whole, the company’s shares have suffered a difficult 2022, falling more than 18% since the outset of the year. That drop is in line with each of the three major stock indexes, which have plummeted this year.
Two Tesla board members, Ira Ehrenpreis and Kathleen Wilson-Thompson, were on the ballot this shareholder meeting and were re-elected. The Institutional Shareholder Services advised shareholders to vote against both of them because of the amount of borrowing Musk and other board members do as collateral of Tesla stock. The The ISS argued that pledging of company stock by directors poses a risk to outside shareholders. The fourth thing to know about Tesla’s Aug. 25 stock split is that it’ll have absolutely no impact on the company’s day-to-day operations. That means it won’t impact the competitive advantages Tesla has ridden to one of the largest corporate valuations in the world. The second important tidbit of information Tesla’s current and prospective investors should know is the magnitude of the forward stock split.
This is because she believes that Tesla’s progress in self-driving car technology will put it at the forefront of a new industry. More specifically, Wood believes Tesla is on the verge of launching a robotaxi fleet. The advent of robotaxis could significantly impact ride-hailing and delivery businesses alike as it represents a major cost-savings opportunity. Let’s dig into the state of Tesla’s operation and assess if Wood’s price target is feasible.
Since the beginning of the year, dozens of companies have announced and/or enacted stock splits. Only time will tell how this Tesla stock split will impact the company’s market cap. It’s going to be interesting to see how the stock market reacts to Tesla in the next few months.
