Tesla shares spike on five-for-one stock split
Tesla’s move to split its stock into smaller chunks caused its share price to jump more than eight per cent as markets opened this afternoon.
Analysts said the split had the potential to extend a 200 per cent rally in Tesla’s shares this year by making it easier for retail investors to hold the stock.
The five-for-one split – Tesla’s first – comes at a time when analysts and investors have expressed concerns over the stock’s high valuation in the market despite cash burn concerns.
It follows a four-for-one split announced by Apple in late July, the iPhone maker’s first stock split since 2014.
“The move makes sense for Tesla, as it will make its shares cheaper and more accessible to young first-time retail traders using platforms like Robinhood,” said Jesse Cohen, senior analyst at Investing.com.
“While stock splits are typically non-events for investors, the reaction seen in Tesla’s stock following the announcement underlines the surging demand from the Robinhood-retail traders to get in on fast-growing tech names.”
Tesla’s five-for-one stock split means meaning each Tesla shareholder of record at the close of business on 21 August this year will receive four additional shares for every share held on the record date.
Tesla’s share price rally has pushed its market valuation above $250bn, while its chief executive Elon Musk is among the world’s top five richest people. He takes no salary from the role, instead receiving options in the firm on a performance basis.
The electric carmaker reported a $104m profit in its second quarter last month, marking its fourth consecutive quarter of profit despite local lockdown rules shuttering its Fremont plant for several weeks.
“We believe institutional investors have turned the corner in a positive direction as Musk & Co. have not just talked the talk but walked the walk on its Model 3 sales and profitability trajectory over the last year despite Covid,” Wedbush analyst Dan Ives said.