Economy

Tesla Shares Go Into Overdrive After Five-For-One Stock Split

Tesla Shares Go Into Overdrive After Five-For-One Stock Split”

Tesla Inc.is splitting its elevated shares in a 5-for-1 exchange, a move timed to make the stock less expensive for individual investors after the company become the world's most valuable automaker.

The company said on Tuesday that the share split would be made as a dividend distribution that would give 4 additional shares of "common stock" to stockholders recorded as of August 21. Trading will begin on a split-adjusted basis on August 31.

It comes as Tesla has seen a more than 200pc surge in its share price since the start of the year, taking it to record heights of nearly $1,500. The company's shares surged 6 per cent to $1,459 in extended trading after the news about the split came out.

Tesla's stock has been on a tear for most of 2020, as excitement around growing electric-vehicle sales and possible inclusion in the S&P 500 index entice new investors despite a global slump in equities prices amid the coronavirus pandemic.

Shares in the United States electric vehicle manufacturer have rocketed in recent weeks, making Tesla the highest-valued automaker in the world.

The timing of the split may have come as a surprise to close followers of Tesla Chief Executive Officer Elon Musk's Twitter feed.

"At a time where the appetite for the stock and overall EV story continues to gain momentum, I think it's a smart move", said Dan Ives, an analyst at Wedbush who rates the shares the equivalent of a hold.

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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.

The electric auto manufacturer fixed August 21 as the record date for splitting the stock.

Stock splits are typically done when the price of a stock gets so high that it intimidates small shareholders.

Tesla's move follows a four-for-one split announced by Apple Inc AAPL.O in late July, the iPhone maker's first stock split since 2014.

At the end of July, Apple announced a four-way share split at a time when each share was worth around $385.

Prices rose sharply after the announcement, closing at $437.50 yesterday.

Tesla's share prices have risen quickly in recent months.



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