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A Tesla car in Germany in 2015.
Getty Images
The day has arrived. Stock in the pioneer for electric cars
Tesla
divides 5 by 1 after the market closes for trading.
Tesla (ticker: TSLA) shares will open on Monday at about $ 450-one-fifth of where the stock is currently trading. Mathematics with stocks and figures associated with it generally does not amount to much, but Tesla is the exception.
With Tesla shares, the numbers are always part of the story.
Shares were up 958% last year from Thursday’s closing price. The stock has won 445% so far – comparing similar gains from the
S&P 500
en
Dow Jones Industrial Average
and leave the company with a market capitalization of more than $ 417 billion.
Since the split was announced, Tesla shares have gained 66%. That gain makes the jump of 11% this week small. (Tesla shares were up 1.2% again early Friday.) The numbers since the split announcement are great to see. Tesla seems to be worth about $ 160 billion more because it trades at a lower absolute price.
That logic spans credibility.
However, not all shares are split. Estimates of Tesla’s earnings and analysts’ forecasts for the share price rose. Investors are optimistic about September 22, when Tesla will spend a day explaining developments in battery technology. Investors are hoping to talk about costs, how far Tesla can extend the range its cars can travel on a single charge, and how long their batteries will last.
Battery life is the next big factor after the split that could move the stock. What happens after the split itself, everyone is a guess.
Few experts predicted a gain of more than 60% in the wake of the August 11 share news. Investors may have piled into Tesla shares before the split pending higher demand from individual investors Monday.
If the question comes out, Tesla shares could pop up next week. If the pop does not happen and traders come out of recent positions, then stocks may fall.
Another wild card for Tesla stock traders is the potential uptake of the shares in the S&P 500. After Tesla reported a profit in its last fourth quarter under generally accepted accounting principles, the stock qualified for the Index.
Tesla bears have questioned the quality of Tesla revenue. They point out that the sale of regulatory credits – earned by producing more electric cars than regulators require, to carmakers producing less – leads to reported profitability. It’s true, but anyone who follows Tesla knows it sells credits. And the gains were made during the pandemic, when U.S. car sales declined.
This bearish argument, at this point, feels like spitting in the wind. The S&P index committee is probably not talking about the debate on regulatory credit. If they do, investors will not hear about it. Deciding whether to include Tesla is entirely discretionary.
Tesla is likely to go into the index. It is the seventh most valuable company in America. Thursday surpassed Tesla
Visa
(V) in terms of brand letters. Next is
Berkshire Hathaway
(BRK. B).
Passing Berkshire would be a major coup for Tesla bulls. Value investors like Berkshire’s Warren Buffett are struggling with Tesla’s rating. Tesla Bulls thinks the company is a so-called platform company with new technology and a lot of room for profit growth.
Platform companies are those
Call
(AAPL) or
Amazon.com
(AMZN), with multiple companies allowing third parties to thrive using their technology. In the case of Tesla, that includes solar energy storage. Along the way, robotics could become a member of the list.
Eclipsing Buffett would be another feather in the cap of the bulls.
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