Tesla (NASDAQ:TSLA) has seen its stock soar substantially so far this year. Managing to turn itself around in 2019, the company has continued to rise despite the effects of the COVID-19 pandemic. Demand for electric cars continues to remain strong, in contrast to many other automakers that have seen their revenue figures plummet during these lockdowns. In light of all this, Tesla has now announced that it would be implementing a five-for-one stock split.
Many other companies have been pursuing stock splits as well over the past recent while. Microsoft announced earlier in July that it would be undergoing a 4-for-1 stock split. Apple also announced that it would be going through a stock split as well. In general, stock splits are used to keep prices within a certain price range in order to improve the liquidity and accessibility of shares. This is typically seen as a good sign among traders and investors, with the stock likely to jump a little bit 24 hours following the announcement.
Tesla went on to say that “the Board of Directors has approved and declared a five-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.”
Elon Musk had previously said that he thinks the company’s stock price is too high, and that he would be open to considering a stock split in the future. Other investors close to Musk have argued in favor of a stock split as well.
One reason why the company’s stock has done so well is that it opened a new Model 3 sedan factory in China. This is both improving production rates as well as helping with sales, especially since a lot of demand does come from Chinese buyers. This also offsets the setback of Tesla’s closed San Francisco car factory, which was shut down by state officials in an effort to slow down the spread of the pandemic.
Shares of Tesla are up 6.5% right now in after-hours trading following the news. Again, while nothing changes fundamentally in a company by doing a stock split, it’s been traditionally seen as a good move by traders and investors. As of right now, the stock is trading at an impressive $1,463 per share, making Tesla the most highly valued carmaker in the world with a market cap of around $250 billion. Considering the trials and tribulations the carmaker has had over the years with many skeptical analysts out there, it seems like the last laugh will go to Elon Musk after all.
Tesla Company Profile
Founded in 2003 and based in Palo Alto, California, Tesla is a vertically integrated sustainable energy company that also aims to transition the world to electric mobility by making electric vehicles. It sells solar panels and solar roofs for energy generation plus batteries for stationary storage for residential and commercial properties including utilities. The Tesla Roadster debuted in 2008, Model S in 2012, Model X in 2015, Model 3 in 2017, and Model Y in 2020. Global deliveries in 2019 were 367,656 units. Tesla went public in 2010 and employs about 50,000 people. – Warrior Trading News