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Tesla's (NASDAQ: TSLA) 3-for-1 stock split is another step toward making the stock more affordable to retail investors and giving employees more flexibility in managing their capital. The company's shareholders supported the split in a vote.
Tesla shares rose on Thursday after the close of trading as the company received shareholder approval for a 3-for-1 stock split. The maker is aiming to make its shares more affordable, making them easier to manage and more attractive to an even wider range of investors.
For new investors, a stock split can be a confusing process, but it is extremely simple. Tesla is no stranger to this, as the company went through a 5:1 stock split in August 2020, which went very smoothly and even raised the share price to over $2,000 per share (before the split). It is worth bearing in mind that this does not mean that a new stock split will necessarily lead to an increase in the value of the shares this time as well.
As a result of the approved split, each shareholder will receive 3 shares for each 1 share owned. In this case, the value of each share will be equal to 1/3 of the value of the share at the time the changes come into force. The shareholder will receive a larger number of shares, with the total value remaining the same as their smaller number before the split.
This split is positive for future investors who can afford to buy a whole share at a lower price. People are more likely to buy stocks when they can afford to buy the whole share rather than just part of it. In addition, stock splits give employees who receive stock option awards greater flexibility in managing their capital.
© 2022 by Eva Fox | Tesmanian. All rights reserved.
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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.
About the Author
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.