Tesla shares slip as 3-1 stock split kicks in

Thursday, 25 Aug 2022 11:50 PM MYT

NEW YORK, Aug 25 — Tesla Inc’s shares slipped today as a three-for-one stock split announced by the world’s most valuable automaker to woo retail investors took effect.

Shares of the electric-car maker, led by Elon Musk, opened at US$302 (RM1,350) and dipped to US$293 in early trading.

Tesla’s second stock split in as many years follows those by other high-growth companies, including Amazon.com and Google-parent Alphabet, and highlight the increasing need to diversify investor base.

Stock splits “certainly have a higher appeal to retail investors, and makes their options more affordable as well,” 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 an acknowledgment of that fact.”

Austin-based Tesla had debuted at US$17 in 2010 and shares sky-rocketed to trade at more than US$2,000 at their peak, becoming among the highest priced on Wall Street and making it difficult for small investors to bet on the high-growth stock.

In August 2020, the company decided to split its stock on a five-for-one basis, and breached the US$1 trillion in market capitalisation in 2021.

The stock closed at US$891.29 yesterday before the three-for-one split took effect.

The EV maker is the sixth company in the S&P 500 index to have split its shares this year, according to Howard Silverblatt, senior index analyst for S&P and Dow Jones indices.

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

The company’s shares have fallen about 11 per cent since the company announced in March plans to increase its number of shares.

“In typical buy-the-rumour, sell-the-news style, investors tend to drastically scale back purchases of splitting stocks in the weeks ensuing the effective split date, causing price momentum to slow,” analysts at Vanda Research said in a note.

A stock split does not affect the fundamentals of a company, but makes it easier for individual investors looking to do small trades. However, the benefits of stock splits are becoming less clear as brokerages let customers buy parts of a company’s share.

Tesla’s shares have fallen about 16 per cent this year as worries over aggressive US interest rate increases and geopolitical uncertainty triggered a sell-off in high-growth stocks.

The latest three-for-one split means that stockholders will get two additional shares for each they owned as of August 17. — Reuters

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