Tesla split its stock as the market opened on Thursday, joining firms like Amazon and Alphabet, the parent company of Google, which have chopped up shares this year as a means of reducing their price and making them more accessible to investors.
After the 3-to-1 split, Tesla’s shares were trading at about $302, a third of where they stood prior to market open. Shares later fell to about $296.
Investors received two additional shares for each share they held prior to the split. Each of the three shares will be valued at a third of the original price, leaving the total value of a shareholder’s stock unchanged.
The stock split has largely fallen out of fashion in corporate America. Shares, however, usually rise over the year following a split, according to a study conducted by Nasdaq.
Investors who held Tesla stock on Aug. 17 will be eligible to receive the additional shares.
What does the stock split mean for Tesla?
Typically a stock split signals optimism in a company. It also indicates confidence that the share price will eventually rise to a level near or surpassing where it stood before the split.
Recent performance of Tesla shares support such an interpretation. Over the past month, Tesla stock has surged, rising more than 6% as of early trading on Tuesday. Prior to a drop over the past week, the stock had risen more than 13% since a month ago.
The company last month reported mixed second quarter earnings, which showed a decline in profit of nearly one-third from the previous three-month period in part due to production slowdowns at a factory in Shanghai amid COVID lockdowns.
When compared with the same quarter a year ago, Tesla profit had doubled and revenue had grown 42%, signaling strong growth over the long term.
Still, on the whole, the company’s shares have suffered a difficult 2022, falling more than 18% since the outset of the year. That drop is in line with each of the three major stock indexes, which have plummeted this year.
What usually happens to a stock after a split?
Stock splits usually trigger a rise in the price of shares, according toa Nasdaq study that examined stock splits at large companies between 2012 and 2018. Even the mere announcement of a stock split yielded an average 2.5% price increase for a stock, the Nasdaq found; and a year after a stock split, shares saw an average price hike of nearly 5%.
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