Tesla has announced a new five-way action split to introduce on August 28, making the company’s shares cheaper for buyers.
The electric carmaker’s share closed at $ 1,374.39 per share on Tuesday, close to its full July high and on a total valuation of more than $ 256 billion. But at such high prices, it is difficult for individuals – especially retailers using platforms such as Robinhood – to own more than fractional shares of the company.
If you have a Tesla share on August 21, you will receive four additional shares of common stock on the date of the split. Beginning Aug. 31, Tesla says it will trade on a split-adjusted basis.
Equities are typically neutral events for investors – you once owned one stock and now you own five, but the value remains the same. However, the split makes it easier for individuals – such as those Robinhood-using retail investors who like to invest in fast-growing tech stocks – to become official shareholders. For Tesla, it helps defend against claims that its share price is inflated by reducing the total cost of one share by 80 percent and giving the company the appearance of more affordable and affordable shares.
There are also many other, somewhat random reasons why a company, such as Apple or Tesla, would like to split their stock, as stated in this explorer by BloombergMatt Levine. Some reasons include the inability to move fractional shares between brokers as easily as full value and is concerned that a high price stock liquidity may decrease. But in some cases, it’s just good for appearances to have a lower price, more accessible stock, especially if it’s easier than ever for your average smartphone owner to throw some money into Robinhood and start trading.
Already, Tesla stock is up nearly 6 percent in trading after hours of news of the decision.
