Tesla splits stock to make it more attractive to investors

Andrew Cummings
August 12, 2020

Tesla, Inc. ("Tesla") announced today that the Board of Directors has approved and declared a five-for-one split of Tesla's common stock in the form of a stock dividend to make stock ownership more accessible to employees and investors. In practice, those who own Tesla stock on August 21 will receive four additional Tesla shares per share after trading closes on August 28, 2020.

Elon Musk's Tesla is set to make its shares more affordable to backers after announcing a five-way stock split, the first in its history, on the back of a record year of growth for the electric auto maker.

Tesla's stock has surged over 200% this year, while shares of General Motors and Ford Motor declined on fallout from the coronavirus pandemic. The company's shares surged 6 per cent to $1,459 in extended trading after the news about the split came out.

Tesla has been a favorite stock for day traders and other retail investors, who have helped boost the shares to record highs.

Shares in the United States electric vehicle manufacturer have rocketed in recent weeks, making Tesla the highest-valued automaker in the world. Incidentally, those tweets also sent Tesla share prices rocketing at the time.

Tesla's move follows a four-for-one split announced by Apple Inc AAPL.O in late July, the iPhone maker's first stock split since 2014. The split will be performed in a five-for-one fashion, meaning one stock will be split into five.

Stock splits are typically done when the price of a stock gets so high that it intimidates small shareholders.

Stock splits have become rare on Wall Street in recent years, with just three S&P 500 components announcing splits in 2020, compared with an average of 10 a year over the past decade, according to S&P Dow Jones Indices.

It seems August 2020 is a popular month for tech companies getting in on the stock splitting game.

Prices rose sharply after the announcement, closing at $437.50 yesterday.

Image: Tesla stock price at the time of writing.

It was Apple's fifth stock split since the firm started trading publicly. Towards the end of June, each share of the firm was worth around $1000.

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