By Noel Randewich and Munsif Vengattil
(Reuters) – Tesla Inc. on Tuesday announced a five-for-one action split, sending the electric car maker’s recently high-flying shares 7% into expanded trading.
The Tesla share, which trades at $ 1,475 after the announcement, is one of the highest prices on Wall Street, and the company Palo Alto, in California, said in a press release that it sought to make its shares more accessible to employees and investors.
Tesla’s share has risen more than 200% this year, while shares of General Motors and Ford Motor came out of the coronavirus pandemic at fallout.
Stock splitting is a way for companies to make stocks more accessible to retail investors, and potentially attracts individual investors who make small trades. Brokerage agents, however, allow clients to buy more and more shares of shares, making the benefit of stock splitting less clear than in the past.
Tesla said shareholders of record on August 21 would receive four additional shares after closing trading on August 28, with the stock on a split-adjusted basis beginning August 31.
Tesla’s stock split follows a four-for-one split announced by Apple Inc in late July, the iPhone maker’s first 2014 stock split.
Stock splits have become rare in recent years, with only three S&P 500 stocks announcing splits in 2020, compared to an average of 10 per year in recent decades, according to S&P Dow Jones Indices.
Tesla posted a second-quarter profit in July as cost cuts and strong deliveries helped offset coronavirus-related factory shutdowns, removing an obstacle that could lead the carmaker to be included in the S&P 500 index .
While many institutional investors have preferred Tesla’s share in recent years due to a lack of consistent profitability, the company has a strong following among individual investors.
In the past 30 days, Tesla was only second to Apple as the most popular stock on Robinhood’s app, according to Robintrack, a website that follows Robinhood holdings.
The share distribution of Tesla should not affect the potential decision of S&P Dow Jones Indices to add the company to the S&P 500, which is weighted by the overall share values of companies.
The share distribution will not make Tesla more expensive in terms of the actual earnings it provides to investors. The stock is currently trading with expected gains of 112 times over the next 12 months, according to Refinitiv. By comparison, GM is rated at eight times expected revenue, and Ford at 45 times expected revenue.
(Report by Munsif Vengattil in Bengaluru and Noel Randewich in Oakland; Edited by Leslie Adler)
