Tesla Motors, Inc. (NASDAQ:TSLA) has announced that it will be planning to split its stock 3 for 1. This means that Tesla shareholders will receive three shares of Tesla common stock for each share they currently own. The TSLA stock split date is still to be decided, but August 4 is an important date to mark in your calendars. This article explores why and more.
So, what does this TSLA stock split mean for Tesla shareholders? And should investors buy Tesla stock before or after the split? Let’s take a closer look at what this stock split means for Tesla shareholders!
When is the Tesla Stock Split and Why Does it Matter?
As mentioned, the Tesla stock split will be requested for approval by the SEC (The United States Securities and Exchange Commission) in August. Tesla’s board of directors has also recommended that shareholders vote in favor of the TSLA stock split at the annual shareholder meeting on August 4. Tesla shareholders will be able to vote by proxy if they cannot make it to the meeting.
This decision matters for the future of the Tesla stock price and company because a stock split for the electric vehicle (EV) company means that Tesla’s share price will become more affordable for individual investors. Tesla stock is currently trading around $750 per share and after the Tesla stock split, the TSLA will cost around $250 per share.
A Tesla stock split also signals to the market that TSLA is a stable and growing company. Tesla’s share price has been on a tear lately, hitting new all-time highs almost daily. The Tesla stock split is seen as a way to make TSLA’s stock more accessible to a wider range of investors and help the company raise even more money.
This decision to vote in August was announced at the beginning of the summer in June. As the EV market heats up, Tesla’s move to split its stock could help the company maintain its status as the leading electric vehicle manufacturer.
Since the previous stock split, Tesla claims that its stock price has appreciated by 43%. Of course, past performance does not indicate future success, but TSLA shareholders are certainly optimistic.
Tesla’s 3-for-1 Stock Split
The reason why 3-for-1 makes sense as a ratio for the TSLA stock split is that Tesla has been on quite a run lately. If you are an active shareholder of Tesla, this means that you will soon own three times as many shares of Tesla as you do now. However, the price would also be divided by three, and Tesla’s value would remain the same.
After the split, one share would be an investment of approximately $250 which is significantly more affordable than the current listing price of around $750 per share, but also maintains a premium look. Branding has always been important to Tesla, and this price point would help with that while also enticing new investors.
How The TSLA Stock Split Will Impact Shareholders
As mentioned earlier, TSLA shareholders will vote on the Tesla stock split in August. If the Tesla stock split is approved, then it would be effective starting shortly after the meeting. Make sure to stay tuned to know the exact date of the TSLA stock split, pending on current shareholders’ approval.
If you are a Tesla shareholder and the stock split is approved, you will soon own three times as many shares of Tesla as you do now. The TSLA stock split is seen as a positive move for Tesla shareholders.
First, it will make Tesla’s stock more affordable for individual investors. This means current shareholders can add to their Tesla position more easily, and new investors can get in on Tesla stock’s action.
Second, the TSLA stock split is a vote of confidence from Tesla management. Tesla CEO, Elon Musk, has said that he believes the Tesla stock price is too high. By splitting the stock, Tesla is essentially saying that it believes in its own long-term growth potential. TSLA management would not be doing this if they did not believe Tesla was a good investment at current prices.
Finally, the Tesla stock split could be another catalyst for a double-digit return within the next two years if history repeats.
Tesla’s last stock split occurred back in August of 2020 and it was a 5-for-1 split. The shares were trading at about $2,200 per share. After the Tesla stock split, TSLA shares were around $440 per share and rallied to $700 per share. It’s difficult to say that this price action was solely based on the stock split, but it’s worth noting.
So, by now you are probably wondering if you should buy the Tesla stock split before or after, or even at all? Let’s explore this question in more detail.
Should I Buy the Tesla Stock Split?
If you can make a sound case for Tesla as an investment, then TSLA’s stock split shouldn’t really matter to you. Tesla is a high-growth company that is disrupting multiple industries. The Tesla stock price has been on an absolute tear lately, and there is no reason to think that Tesla won’t continue to be a big winner in the years to come based solely on the stock split action.
If you are on the fence about buying shares of Tesla, then the Tesla stock split could be a good time to buy TSLA. If you believe in Tesla’s long-term growth potential, then buying Tesla stock after a price pullback (aka after the stock split) would be a good way to secure a position in the company.
Remember that the underlying fundamentals and value of the company don’t change just because Tesla splits its stock. Tesla is still the same company after the TSLA stock split that it was before. So, if you are considering buying Tesla stock, make sure to do your own research first.
Should Investors Buy Before or After the TSLA Stock Split?
If we re-evaluate past performance, it’s clear that those who got in before Tesla’s last stock split in 2020 saw big gains. Tesla’s shares were already up a whopping 43% shortly after, and TSLA is now the most valuable automaker in the world.
It’s tough to say if Tesla can replicate this success with another stock split, but TSLA shareholders seem confident. If you can afford the price and would like to potentially own more Tesla shares, then buying before the Tesla stock split may be the right move for you.
Of course, there is always the potential that TSLA stock price could drop after the split. If this happens and you’re still interested in Tesla, then you can always continue to buy or dollar cost average into your position after the Tesla stock split.
Conclusions About the Potential Tesla Stock Split
In short, there is no right or wrong answer when it comes to whether you should buy Tesla before or after the Tesla stock split. It all comes down to your circumstances and investment strategy.
Remember to review your overall investment thesis and determine if Tesla still fits into your portfolio before making any decisions. As a trader, you might be able to reap some short-term benefits if history repeats itself. Thanks for reading and make sure to share this article with others to help them make an informed decision.
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