Tesla shares slip as 3-1 stock split kicks in

Aug 25 (Reuters) – Tesla Inc. (TSLA.O) Shares fell on Thursday as a three-for-one stock split announced by the world’s most valuable automaker to woo retail investors went into effect.

Shares of the electric car maker, led by Elon Musk, opened at $302 and fell to $293 in early trading.

Tesla’s second stock split in as many years follows those of other high-growth companies, including Amazon.com (AMZN.O) and Google-parent Alphabet (GOOGL.O)and highlight the growing need to diversify the investor base.

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Stock splits “certainly appeal more to retail investors and also make their options more affordable,” said Art Hogan, chief market strategist at B. Riley.

“Retail investors are a very important cohort for Tesla, and today’s stock split is essentially a recognition of that fact.”

Austin-based Tesla debuted at $17 in 2010 and the stock soared to trade over $2,000 at its peak, becoming one of the most expensive on Wall Street and making it difficult for investors small investors to bet on high growth stocks.

In August 2020, the company decided to split its shares on a five-for-one basis and surpassed $1 trillion in market capitalization in 2021.

The stock closed at $891.29 on Wednesday before the three-to-one split went into effect.

The electric vehicle maker is the sixth S&P 500 company to split its shares this year, according to S&P and Dow Jones index senior analyst Howard Silverblatt.

Tesla’s ticker was trending on social media stocktwits.com, indicating increased chatter among individual investors.

Shares of the company have fallen about 11% since the company announced plans in March to increase its number of shares.

“In the typical style of buying the rumor and selling the news, investors tend to significantly reduce buying of split stocks in the weeks following the effective date of the split, which slows the price momentum” , Vanda Research analysts said in a note. .

Tesla shares have risen to bring the company’s market capitalization to more than $1 trillion since its previous split

A stock split does not affect a company’s fundamentals, but makes it easier for individual investors to make small trades. However, the benefits of stock splits are becoming less clear as brokerages allow clients to buy portions of a company’s stock.

Tesla shares have fallen about 16% this year as concerns over aggressive U.S. interest rate hikes and geopolitical uncertainty sparked a sell-off in high-growth stocks.

The latest three-for-one split means shareholders will receive two additional shares for each one they hold beginning August 17.

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Reporting by Akash Sriram and Medha Singh in Bengaluru; Additional reporting by Devik Jain; Editing by Sriraj Kalluvila

Our standards: The Thomson Reuters Trust Principles.

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