Tesla’s 3:1 Stock Split Wins Shareholder Approval—Here’s What It Means For Investors

Breaking Markets Tesla’s 3:1 Stock Split Wins Shareholder Approval—Here’s What It Means For Investors Sergei Klebnikov Forbes Staff I cover markets and business news. New! Follow this author to improve your content experience. Got it! Aug 4, 2022, 06:51pm EDT | New! Click on the conversation bubble to join the conversation Got it! Share to Facebook Share to Twitter Share to Linkedin Topline Shares of electric vehicle maker Tesla rallied in after-hours trading Thursday as the company won shareholder approval for a 3:1 stock split, the second such move in around two years, as the world’s most valuable automaker looks to make its stock more affordable.

Tesla’s stock has risen over 30% since announcing the proposed stock split in June. Patrick Pleul/Pool via Associated Press Key Facts In a widely expected move, Tesla shareholders approved the company’s proposed 3:1 stock split, causing shares of the company to continue rallying in after-hours trading following a 0. 4% gain earlier in the session.

Tesla first announced the proposed 3:1 stock split in June as a way to make the $925 stock more affordable; based on today’s closing price the new share price would be around $308. Though the stock is down roughly 20% this year amid the wider market selloff, billionaire Elon Musk’s electric vehicle maker has still seen its shares surge more than 200% since the last stock split in August 2020. Stock splits don’t impact a company’s market value, but evidence suggests that by making shares more affordable to retail investors, the move does often provide a short-term boost to share price.

Tesla shares are up over 30% since announcing the 3:1 split in early June, while news of Tesla’s 5:1 stock split roughly two years sent shares over 70% higher in the 20 days following the announcement. Several other major tech companies have announced stock splits this year and saw subsequent spikes in their share price; Google-parent Alphabet’s split 20:1 in February and Amazon’s stock split 20:1 split one month later. Crucial Quote: “When stocks trade in a so-called comfortable range, everyday investors can more easily afford a piece of the company,” according to Lindsey Bell, Ally’s chief money & markets strategist.

“That drives more interest in the shares and more interest means more people trading the stock. ” Key Background: Tesla reported mixed second quarter earnings last month which largely beat analyst expectations. Production took a hit, however, worrying analysts as the company was impacted by ongoing supply chain disruptions as well as a factory closure in China that was due to Covid-related government lockdowns.

Tesla’s quarterly revenue of $16. 9 billion rose 42% from a year ago, though it fell from a record high of $18. 7 billion in the previous quarter, ending the company’s streak of record profits.

“In a nutshell, the quarter was better than feared with healthy guidance” for the rest of the year, which certainly “look[s] achievable with no margin for error,” Wedbush analyst Dan Ives said following the earnings report. Chief Critic: Tesla shares are overpriced and could plunge more than 50%, according to Citi analysts, who maintain a “sell” rating on the stock with a $424 price target. “The current valuation remains challenging,” especially when considering that the few other companies that achieved a similar market cap did so by generating on average around $100 billion in annualized gross profit versus Tesla’s annualized profit of $20 billion in the first half of the year, the firm points out.

Big Number: $279. 3 Billion That’s how much Tesla CEO Elon Musk is worth , according to Forbes ’ estimates. He is the world’s richest person.

Further Reading: Tesla Shares Rally Despite Slowdown In Profits, Impact From China Shutdown ( Forbes ) Follow me on Twitter or LinkedIn . Send me a secure tip . Sergei Klebnikov Editorial Standards Print Reprints & Permissions.