Often referred to as the ultimate meme stock, Tesla is synonymous with its boisterous and often controversial CEO, Elon Musk, and his large fanbase. Because of this, Tesla stock is volatile, with investors watching their investments rise and fall more often than they’d like.
However, Tesla stock has reached all-time highs that most retail investors can’t always afford. This is when a stock split occurs, making the company’s share price more affordable for the everyday investor.
But what is a stock split, and how many times has Tesla split its shares? Let’s dive into stock splits and how it’s affected Tesla share prices before and after each split.
What is a Stock Split?
If you’re new to investing, the term “stock split” may seem intimidating, but it’s common in many public companies. A stock split is when a company’s stock is split into multiple, smaller shares.
For instance, if a company announces a 2-for-1 stock split, one stock will split into 2, and the value of each stock after the split will equal one stock before the split.
Let’s say you owned one Tesla stock worth $10 before a 2-for-1 split. After the split, you will own two shares valued at $5 each. While you now have more shares, your investment value remains the same. In addition, a stock split does not significantly impact a company’s overall value.
Why Do Companies Split Their Stock?
There are many reasons why a company like Tesla will undergo a stock split, including:
- To increase the number of its outstanding shares
- To make the stock more attractive to individual investors
- To attract more institutional investors
- To attract more retail investors
- To boost the stock’s liquidity
- To reduce the price of each stock
- To increase the demand for the stock
- To potentially increase the company’s market capitalization
In the case of Tesla, Elon Musk has said that a lower stock price helps recruit and retain skilled staff. This is because it provides Tesla employees more freedom to manage their ownership through compensation plans or stock purchase plans.
Tesla Stock Split History
Since going public in June 2010, Tesla has undergone two stock splits.
The first stock split was 5-for-1 on August 31, 2020. For every stock investors owned before the split, they would now own five shares. For example, if you owned 5 Tesla stock before the split, you would own 25 shares after the split.
The second stock split was 3-for-1 on August 25, 2022. This means that if you owned one Tesla stock before the split, you would have 3 Tesla shares after the split.
Tesla’s CEO, Elon Musk, has not made any announcements of a possible stock split in the future. Before the recent split in 2022, Tesla stock was trading at under $900 per share. As of August 31, 2023, Tesla shares are trading at $258, so it’s unlikely the company will undergo another stock split at its current price.
Owning Tesla stock isn’t for every investor, as the stock price is volatile. However, owning Tesla stock can benefit your investment portfolio in the long run, as it will help diversify your portfolio.
If you cannot afford to purchase Tesla shares, you can wait for the company to undergo a stock split and buy the shares at a reduced price. But you could also be losing out on future gains, so if you are interested in the stock, consider purchasing fractional shares.
Before taking the plunge, consider the risks, do your research, and stay up-to-date with market trends. It’s also beneficial to discuss your investment strategy with a financial advisor.
The image featured at the top of this post is ©Viiviien/Shutterstock.com.