The highly-watched Tesla stock split has finally settled!
On the afternoon of Thursday (August 4), Tesla's annual shareholders' meeting officially passed the stock split plan. Tesla will conduct a stock split transaction of 1 share split of 3 shares, thereby lowering the investment threshold, but Tesla did not specify the effective time.
As early as March 28 this year, Tesla announced its share split plan through Twitter, and this plan will officially take effect after the voting approval of this shareholders' meeting. After this split of , Tesla's share price is expected to drop from the current $925.9 to around $300. Although the stock split will not change the fundamentals, it may increase liquidity. Judging from past experience, stock splits usually stimulate stock prices to rise.
Specifically, Tesla broke up its shares two years ago. On August 11, 2020, Tesla announced a 1:5 share split, and the adjusted stock began trading on August 31, 2020. Once the news of the stock split was announced, Tesla rose 37% in a week.
It is worth noting that after the stock split, Tesla continued to soar from around US$400 per share, and rose by nearly 80% in the next five months. became the rise of the entire US technology stock and even the global electric vehicle-related industrial chain stocks.
Some analysts said that theoretically splitting stocks is just a technical operation, but splitting stocks can lower the stock price and attract more individual investors to buy. is particularly significant for technology stocks with high stock prices today.
In addition, psychological factors may also play a role, such as making it easier for individual investors to hold the stocks of the company they are optimistic about. After all, high stock prices are always prohibitive.
In addition to the stock split, what surprises does the shareholders' meeting bring to investors?
Tesla CEO Musk said at the meeting that will launch a non-beta (Beta) fully autonomous driving (FSD) software. He mentioned that the performance of FSD Beta in "complex left-turning" is impressive.
According to Tesla's full-year financial report for 2021, services and other businesses including autonomous driving software achieved revenue of US$3.802 billion, an increase of 65% year-on-year, accounting for 7.06% of the total revenue. According to the revenue trend of the smart electric vehicle industry in the future, hardware, software and services will all be "a place that must be fought for by the military." It is not unreasonable for Musk to attach importance to software.
Musk also revealed that the company's goal is to reach a production capacity of 2 million cars per year by the end of 2022, and the company will continue to build production plants in the next step. He pointed out that Tesla may announce details of the addition of a factory this year, such as site selection.
In addition, Musk also said that is possible to repurchase stocks based on future cash flow.
Musk also talked about the current macroeconomic situation, saying that inflation may decline rapidly, but the US economy will still suffer a "slight recession" for up to 18 months. It boasts that Tesla has considerable insight into inflation because the company needs to purchase commodities several months in advance. What will happen in the future
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Since the end of May, Tesla's stock price has also rebounded sharply, with a cumulative increase of nearly 40%.
Roth Capital Partners analyst Craig Irwin said:
Tesla's timing for splitting shares seems impeccable. The timing of shareholder votes comes at a time when "the market seems to be moving in the right direction."
In addition, Tesla, a stock market darling, may soon win the support of Wall Street's slowest-moving skeptics: credit rating analysts.
Credit analyst Joel Levington said that
, thanks to Tesla's stable profit flow, a credit rating upward may arrive soon. As of the end of June this year, Tesla had nearly $19 billion in cash and short-term investment. It expects Tesla to generate more than $24 billion in additional free cash flow by the end of next year. This will exceed the combined GM and Ford Motors and far exceed Tesla's debt burden.
Credit market generally expects Tesla's credit rating to be upgraded this year.
credit rating upwards may boost Tesla's share price as some mutual funds are banned from investing in junk-grade companies. This may be one of the reasons why institutional investors hold less than Apple, Amazon, Meta Platforms and Alphabet. "At present, many funds cannot own stocks with lower ratings than investment grades," said Gary Black, managing partner of the Future Fund. He said that an upward credit rating will put Tesla in the ranks of blue chips.
However, investors also need to note that most of the risks that plagued Tesla earlier this year remained: supply chain disruptions are far from being resolved, international tensions are escalating, and Musk and Twitter are involved in a potentially long and costly legal dispute.
Edit/somer
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