Tesla’s stock prices jumped dramatically on Wednesday after a surprise announcement from the company. Tesla has stated it will be offering a five-for-one stock split in the near future.
In a press release Tesla said its board of directors had approved the five-for-one stock split. It will come into effect at the close of trading on August 28 in the U.S. This means shareholders will receive five shares for every single share they own. These shares will then begin trading from August 31.
Tesla, Inc. (“Tesla”) announced today that the Board of Directors has approved and declared a five-for-one split of Tesla’s common stock in the form of a stock dividend to make stock ownership more accessible to employees and investors. Each stockholder of record on August 21, 2020 will receive a dividend of four additional shares of common stock for each then-held share, to be distributed after close of trading on August 28, 2020. Trading will begin on a stock split-adjusted basis on August 31, 2020.
Tesla might be claiming accessibility as a primary reason, but this doesn’t mean the stocks are cheap.
The announcement resulted in Tesla shares jumping by 6.46 per cent during extended trading hours. The share price sat at $US1,374.39 at market close. At the time of writing, during after hours trade, it is sitting at $US1,463.23 per share.
Splitting Tesla stock was first discussed publicly on Twitter back in July. A Tesla fan from Wollongong, NSW asked Musk if he would consider a stock split so more fans could invest in the company.
The account also alluded to Musk’s infamous $420 stock price debacle from 2018. Incidentally, those tweets also sent Tesla share prices rocketing at the time.
Musk responded to the Tesla in the Gong tweet, saying it was worth bringing up at the annual shareholders meeting.
Worth discussing at annual shareholders meeting
— Elon Musk (@elonmusk) July 1, 2020
It seems August 2020 is a popular month for tech companies getting in on the stock splitting game. At the beginning of the month Apple announced its first stock split since 2014. It will be offering shareholders a four-for-one split. Apple also cited accessibility for investors as a primary reason for the split.