1 tear 3 is finally here!
August 24, after the U.S. stock market, the stock split plan for Tesla 1 split 3 will officially take effect, and the trading of split stocks will officially begin on August 25.
Tesla is not the only company this year to split . Since the beginning of this year, dozens of companies including Alphabet, Amazon and Shopify have announced or implemented share splits.
In February this year, Google parent company Alphabet split the stock at a ratio of 20:1. A month later, Amazon split the stock at a 20:1 ratio.
In fact, the split of stocks will not affect the company's value, because it is just a change in 's equity structure and does not involve substantial changes, but it can increase the attractiveness of company stocks to retail investors to a certain extent.
For example, on August 24, Tesla's stock closed at $891 per share, and after the stock split, the price per share will be divided by 3 on the basis of $891, and the price per share will eventually become $297.
After Tesla stock "one split three", the split stock price will become one-third of the current stock price. Meanwhile, the number of shares held by existing shareholders at $297 will triple.
Therefore, after "one split three", the number of stocks circulating in the market tripled. According to the stock split plan submitted by Tesla previously, after the split, their common stock will increase from 2 billion shares to 6 billion shares. Tesla currently has more than 1.04 billion common shares in circulation, and after the spin-off, it will exceed 3 billion shares.
Tesla's stock split has only been less than two years since the last time. In August 2020, Tesla split the shares in a ratio of 1 share for 5 shares.
At that time, Tesla's stock price was only US$1,300. With the release of the stock split announcement, its stock price was directly pushed to the historical high of US$2,000 per share (the increase of about 60% from the announcement date to the execution date). After
officially split the stock, Tesla continued to soar from around $400 per share, and Tesla's market value began to soar from that time, rising nearly 80% in the next five months, and reached a trillion-dollar market value one year later.
After this stock split, Tesla's stock price has increased by about 300%. So can Tesla's stock split continue the miracle of the previous sharp rise?
Compared with the last time when the stock was split, Musk was "successful" this time. At that time, Tesla had just made a profit for two quarters, and analysts were still questioning the sustainability of its profits and how a car company with only a fraction of Ford's revenue supported a valuation higher than the sum of the market value of the nine major automakers.
Today, Tesla has proven its continued profitability. The financial report shows that Tesla's operating income in the second quarter was US$16.934 billion, which doubled its profits compared with the same period last year, indicating a 42% increase in revenue, indicating a long-term strong growth.
Splitting stocks can also show management's optimistic attitude towards the future. After all, no company will split a stock that is expected to fall.
Although there are still many analysts who have serious differences on the valuation of Tesla stock , Tesla's stock price has stood above the $1,000 mark, which has significantly pushed up the threshold for small and medium-sized investors to build positions. Stock splitting will undoubtedly expand the company's attractiveness among retail investors.
Judging from past experience, the increase in the scale of investors and trading frequency after the company splits the stock will often lead to a short-term increase in stock prices. For example, after Apple announced its share split in July 2020, its share price rose by 30% within one month.
Wall Street Journal report cited an analysis by Bank of the United States , showing that from 1980 to March 2022, split stocks usually rose about 25% in a year after splitting, while market rose by 9%.
Look at Amazon and Google, which split the stock this year. As of the close of US stocks on August 24, the stock prices of both companies have risen to varying degrees, among which Amazon's stock prices have also become triple-digits again. And some analysts said that the stock price is expected to rise above $360 after the stock split.
Multi-party analysis and Amazon and Google's precedents, investors may be able to look forward to Tesla's stock price performance, but the previous miracle of rising may be difficult to achieve.Because the expectation of the Federal Reserve's interest rate hike in continues, the valuation of growth stocks like Tesla will also be suppressed to a certain extent.
This shows that Tesla's stock price will inevitably rise after the stock split, but how much it rises is a question mark!
