Potential Tesla investors listen up!
If you have been eyeing to invest in Elon Musk’s electric vehicle (EV) company, Tesla, for quite a while now yet don’t have that much money lying around to spare or you’re an investor keen to diversify your investment portfolio, then the company’s recent announcement will definitely delight you all.
They have announced that they will introduce a new five-way stock split effective late this month. This move is seen to make the price of Tesla shares go down, thus making it easier for traders to buy up the company’s stocks.
This comes after Tesla becomes the world’s most valuable car company with more than $200 billion in valuation. These days Tesla stocks would cost you more than $1,300 a share which may not be too much of a big deal for some. However, some people might find it too much of an asking price. This predicament is quite true for small retail traders using different platforms to invest (e.g. Robinhood).
What happens if you already own stocks from the company you may ask?
As Nick Statt of The Verge reports, if you have stocks in the company by 21 of August, you’ll get credited four more additional shares of common stock seven days after.
The company states that by the end of the month they will begin to conduct trading using the split-adjusted basis.
Why the move?
Many people would ask why Tesla made such a move. Events like this happen quite a lot in the trading scene, some might happen under the radar without causing too much of a fuss. But c’mon, we’re talking about Tesla here.
Again, as we have mentioned earlier, the move is seen to be beneficial for small-time traders to gain the opportunity to officially own stocks in the company. For current shareholders, this is really uneventful. If you’re an investor and you own a stock, now it’s five however the value stays the same.
For the company, in general, there may be a plethora of reasons why they would do such a thing. In Tesla’s case, this is a good move to show to naysayers that its stock price is artificially inflated – which results in more investor confidence.
Matt Levine of Bloomberg explains that a few more reasons behind such an event would be that an expensive stock would be a hindrance to liquidity and fractional shares will not be moved compared to full-priced stocks.
Tesla’s reason behind this latest move is up for debate. We should all watch closely in the direction where this event would lead us in terms of the future of the company.