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Why Tesla (TSLA) Could Do A Stock Split & How It Could Affect Retail Investors, Future Shareholders

by Ma. Claribelle Deveza July 06, 2020


Featured Image Credit: Tesla

As the second quarter of 2020 came to a close, Elon Musk said on Twitter that a Tesla (TSLA) stock split might be worth discussing at the annual Shareholders’ Meeting scheduled tentatively in September. At the closing bell on July 2, TSLA shares were valued at $1,208.66. As of this writing, before trading hours, TSLA shares are projected to go up 6.23% to US$1,283.90. Tesla’s market cap went up last week as well and is now US$224.176 billion.

TSLA shares may go up even more by the end of this month after Tesla’s Q2 2020 Earnings Call. Tesla recently released its Short Shorts merch which many speculate means the company will report a profitable quarter during the upcoming Earnings Call. The third quarter will end in September, which happens to be when Tesla Battery Day and the Annual Shareholders Meeting are scheduled. Both events could also affect the stock price.

Given that Tesla could go up even more in the next quarter alone, many retail investors agree that splitting the stock may be a good idea. Dave Lee explained his reasons for why TSLA should do a 10-for-1 split and what it could mean for shareholders in a video (seen below).

Lee reasoned that Elon Musk’s tweet about a TSLA stock split revealed that he was open to the idea. “In my opinion, Elon’s reply to this tweet show’s that he’s open, actually to doing a stock split. He sees some validity to doing a stock split. And because I think there are very little negatives for doing a stock split, ultimately—I think—Elon, the board, and Tesla will decide to do a stock split probably within the next year or so,” Lee said.

Lee suggested that Elon Musk and Tesla’s board should do a 10-for-1 stock split to make it easier for existing investors and for the company as well. “…my suggestion is to do a 10-for-1 stock split. And its just the easiest. Just add a 0 to your shareholdings and that’s going to be the number of shares you hold. And it will make kinda the whole process I think a little more easier for everyone.”

Lee gave three arguments supporting a stock split for Tesla, which were: 1) it broadens the appeal to retail investors, 2) there are few drawbacks to a stock split, and 3) a stock split could improve TSLA’s chances of being included into the Dow Jones Industrial Average.

A lot of investors who currently hold TSLA shares have cited Lee’s first argument for splitting the company’s stocks as well. Investors in the Tesla community seem very open to sharing a piece of the company with more retail investors. Splitting the stock would give new retail investors a chance to support Tesla at a more comfortable share price.

As for his second argument, Lee said that there were very few drawbacks to splitting stock as long as the company was confident about the future. Currently, Tesla’s potential seems to be growing even more and not just in the auto industry. For example, Tesla Energy still has plenty of room for growth.

Lee’s third argument offers a unique perspective. He argued that TSLA as it is now would be too high to be included in the Dow Jones Industrial Average, but a stock split could change that. Most investors right now, however, seem to be rooting for Tesla to be included in the S&P 500

Lee also talked about three arguments against TSLA doing a stock split in his video. 

Legal Disclaimer --

This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Ma. Claribelle Deveza, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Ma. Claribelle Deveza holds zero share 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.

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