Tesla (TSLA) announced yesterday that it would split its highly valued shares on a 5-for-1 exchange. This step is taken in order to reduce the cost of shares for individual investors.
As a result of this split, each registered shareholder on August 21 will receive a dividend of four additional shares of common stock for each one they own. The massive rally in the past few months in stocks has pushed TSLA shares out of reach for some small retail investors, especially young people, while Tesla's development captures their imaginations.
CNBC's Jim Cramer gives his take on this move on Squawk Box. He is an advocate of the share split.
"I have urged everyone one of the CEOs with the big dollar amount stocks to split. Someone listening."
He said America is changing and there are many young people out there who want to buy Tesla shares. When the stock price gets lower, it will become psychologically easier to buy them. So the idea of attracting young people to the stock market is terrific and splitting up the stock will bring new buyers to the market. Those who never thought they could buy stocks now have a choice.
The stock, which has more than quadrupled since March and closed above $1,600 last month, has become inaccessible for many people. But the split will be a great opportunity to acquire shares. Tesla will start trading on a split-adjusted basis on August 31st.
“At a time where the appetite for the stock and overall EV story continues to gain momentum, I think it’s a smart move,” said Dan Ives, an analyst at Wedbush. He believes Tesla has followed suit from Apple, which announced a 4-for-1 split after it closed on July 30.
“The stock split is a recognition of the fact that the market is increasingly influenced by individual investors, including those looking to gain exposure to next-generation transportation,” Ben Kallo, a Robert W Baird analyst.
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Eva Fox holds zero shares of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.