The company says that, unlike other manufacturers, it gives every employee the opportunity to receive equity. Tesla notes that, from its last split in August 2020 to the date of proxy statement on June 6, 2022, the price of its shares rose by 43.5%. Tesla shares are overpriced and could plunge more than 50%, according to Citi analysts, who maintain a “sell” rating on the stock with a $424 price target. But the far bigger worry here is that Musk’s forward-looking statements, which play a key role in buoying Tesla’s pricey valuation, have a history of missing the mark.
Tesla (TSLA) announces 3-for-1 stock split with stock dividend coming August 24
The split resulted in the price per share being reset at around $460 and a valuation of about $430 billion. The stock grew quite fast following the 5-for-1 split with Tesla, roughly doubling its valuation over the next year. Though Musk is viewed as a visionary, and is potentially inseparable from Tesla, when examined from an investment standpoint, he brings a slew of legal, financial, and operating risks to the table that could quickly deflate his company’s premium valuation.
The Tesla Stock Split Is Complete: 5 Things to Know About Wall Street’s Most Anticipated Split
Forward stock splits are what usually get investors excited, because a company wouldn’t be enacting a split if it weren’t executing well and out-innovating its competition. While stock splits don’t influence a company’s value, it makes it more affordable to retail investors. Stock splits increase the number of outstanding shares while simultaneously decreasing the cost of each share. Conversely, Tesla’s share price will be reduced by a third following its August 24 close. Tesla says that reducing the market price of its common stock through a split will give its employees “more flexibility in managing their equity.” The company believes increasing employee satisfaction in this manner may help to maximize stockholder value.
- For instance, Musk’s possible acquisition of social media platform Twitter represents the latest in a long history of questionable decision-making by a CEO who should be focused on the world’s most valuable auto brand.
- You might be wondering what impact Tesla’s stock split could have on its day-to-day operations, balance sheet, or operating income statement.
- The widely followed S&P 500 and growth-dependent Nasdaq Composite both plunged into bear market territory; the U.S. economy has delivered back-to-back quarters of gross domestic product declines; and the U.S. inflation rate hit its highest level in more than 40 years.
- But even after approving the 3-1 proposal, Tesla’s stock is still down more than 28% year to date.
- It’s worth noting that Tesla’s retail investor following is quite vocal on social media message boards, and the company’s CEO, Elon Musk, knows it.
- Certain statements, including, without limitation, statements regarding the expected timing and impact of the stock dividend are “forward-looking statements” that are subject to risks and uncertainties.
Elon Musk remains the company’s greatest risk/liability
One of the most important things to recognize about forward and reverse stock splits is that they have no effect on the operating performance of a publicly traded company. Adjusting the share price and outstanding share count amounts to window dressing. Shareholders of Tesla, Inc. (TSLA) approved a 3-for-1 split of the company’s common stock at its annual meeting held after the close of the markets on Aug. 4, 2022, according to a preliminary tally announced at the meeting. A final count will be issued on SEC Form 8-K within four business days. The vote increases Tesla’s authorized common shares from 2 billion to 6 billion.
Tesla Stock Split: Everything You Need to Know About the Upcoming Split
The existing credit was phased out after a carmaker sold 200,000 electric vehicles. But this bill would make the credit available to qualifying Tesla and General Motors (GM) vehicles. While a stock split theoretically should not alter the valuation of all shares outstanding, lowering the price per share may attract more potential buyers, boosting the stock’s aggregate valuation somewhat. Yesterday, Tesla shareholders voted on a proposed 3-for-1 stock split and approved it with a strong majority (over 815 million shares for and just 9 million shares against).
As audience members yelled out suggesting various states and countries, Musk responded jokingly. “I’m half Canadian, so maybe.” Tesla currently has plants in California, Berlin, and Shanghai. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
Each stockholder of record on August 17, 2022 will receive a dividend of two additional shares of common stock for each then-held share, to be distributed after close of trading on August 24, 2022. Tesla, Inc. (TSLA) (“Tesla”) announced today that the Board of Directors has approved and declared a three-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. Of course, Tesla shares aren’t just magically getting cheaper—the 3-for-1 stock split was one of several moves approved at the company’s shareholder meeting on August 4.
It’s also possible the value of your portfolio could plummet if your online brokerage hasn’t properly adjusted for the coming stock split and Tesla represents a sizable position. Either way, these are nothing more than data errors that should be corrected within 24 hours. In its proxy statement, Tesla stated that attracting and retaining top talent is the primary motivation for seeking to split its common stock.
Two Tesla board members, Ira Ehrenpreis and Kathleen Wilson-Thompson, were on the ballot this shareholder meeting and were re-elected. The Institutional Shareholder Services advised shareholders to vote against both of them because of the amount of borrowing Musk and other board members do as collateral of Tesla stock. The The ISS argued that pledging of company stock by directors poses a risk to outside shareholders. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.
Although investors are hyped up at the moment, a stock split doesn’t mask the fact that one of the most widely held stocks on the planet is facing a slew of headwinds. When a company’s stock splits, each existing share gets divided into the corresponding number of split shares. After Tesla’s stock split went into effect, each shareholder who owned one share now own three shares. Tesla’s share price and the number of shares it ultimately has outstanding have absolutely no impact on the company’s ability to produce and sell EVs or innovate. Something for current and prospective investors to keep in mind is that stock quote providers, and even some online brokerages, can take a couple of hours to perhaps even a full day to recognize that a forward stock split has taken place. It’s possible you might wake up and see a quote for Tesla down 65% to 70%.
In other words, investors wanting to take a stake in Tesla can now do so with a considerably smaller amount of money. Tesla shareholders approved the new stock split at the annual shareholder meeting in Austin, Texas. The company first announced the proposed split several months ago via a March 28 tweet.
People prefer to buy and sell an even number of shares, and they like to pay within a particular range if possible,” Stovall said. To add, stock splits have no effect on a company’s income statement or balance sheet, either. Tesla’s cash position, net income, and fundamental metrics, such as price-to-earnings ratio, are the same with its share price below $300 as they were when its stock traded near $900. Lastly, Tesla’s shareholders and prospective investors should understand that stock split-mania is a short-term event.
Out of the more than 200 stock splits announced and enacted through the first eight months of the year, arguably none has been more anticipated than that of electric vehicle (EV) manufacturer Tesla (TSLA 5.23%). The world’s most valuable automaker announced its intent to conduct a split in June, and with shareholder approval, it moved forward with a 3-for-1 stock split on Aug. 25, 2022. Many experts assume the Tesla split will make the company’s stock more affordable to retail investors. Tesla’s common stock plunged from its record high in November 2021 and fell to a low in June of this year, when it began to stage a strong advance, approaching $1 trillion in market value. It’s nice to have at least the perception of getting something for nothing.
The approval of the new stock split hasn’t helped the stock so far with Tesla being down 6% today. This vote comes on the heels of Musk’s ongoing entanglement with his now rescinded offer to buy Twitter and a disappointing quarter for the company.
The Tesla stock split doesn’t change the fact that Musk’s empty promises could come back to bite shareholders. It’s worth noting that Tesla’s retail investor following is quite vocal on social media message boards, and the company’s CEO, Elon Musk, knows it. Nominally reducing Tesla’s share price is an easy way to keep these everyday investors engaged.