Tesla’s 3:1 stock split wins shareholder approval – here’s what it means for investors



Shares of electric vehicle maker Tesla rose in after-hours trading Thursday as the company won shareholder approval for a 3:1 stock split, the second such move in about two years since the world’s most valuable automaker. wants to make its shares more affordable.

Key facts

In a widely anticipated move, Tesla shareholders approved the company’s proposed 3:1 stock split, which kept the company’s stock rising in after-hours trading following a 0.4% gain earlier in the session.

Tesla first announced the proposed 3:1 stock split in June as a way to make the $925 stock more affordable; based on today’s closing price, the new share price would be around $308.

While the stock is down about 20% this year amid wider market sell-offs, billionaire Elon Musk electric vehicle maker has still seen its shares rise more than 200% since its last stock split in August 2020.

Stock splits don’t affect a company’s market value, but there is some evidence that by making stocks more affordable for retail investors, the move often gives a short-term boost to the stock price.

Tesla shares are up more than 30% since the 3:1 split announcement in early June, while news of Tesla’s 5:1 stock split for about two years sent shares soaring more than 70% in the 20 days following the announcement.

Several other major tech companies have announced stock splits this year and have seen subsequent spikes in their share price; Google parent Alphabet’s 20:1 split in February and Amazon’s 20:1 stock split a month later.

Crucial Quote:

“When stocks trade in a supposedly comfortable range, ordinary investors can more easily afford a share of the company,” said Lindsey Bell, Ally’s chief money and markets strategist. “That creates more interest in the stock and more interest means more people are trading the stock.”

Main background:

Tesla reported mixed second-quarter results last month, which far exceeded analyst expectations. However, manufacturing took a hit, but analysts were concerned as the company was hit by ongoing supply chain disruptions and a factory shutdown in China due to Covid-related government lockdowns. Tesla’s quarterly revenue of $16.9 billion rose 42% from a year ago, although it fell from a record high of $18.7 billion in the previous quarter, ending the company’s record profit. “Overall, the quarter was better than feared with sound guidance” for the rest of the year, which certainly “look[s] achievable with no margin for error,” Wedbush analyst Dan Ives said after the earnings report.

Chief Critic:

Tesla shares are overpriced and could fall more than 50%, according to Citi analysts, who maintain a “sell” rating on the stock with a price target of $424. “Current valuation remains a challenge,” especially if you considers that the few other companies that reached a comparable market cap did so by generating an average of about $100 billion in annual gross profit versus Tesla’s $20 billion annual profit in the first half of the year, the company notes.

Large Number: $279.3 Billion

That’s how much Tesla CEO Elon Musk is worth, according to TSWT‘ treasure. He is the richest person in the world.

Read further:

Tesla shares rise despite earnings slowdown, impact of China Shutdown (TSWT)



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