From August 31, the total value of Tesla shares held will not change, but the number of shares will increase by a factor of 5. It is the consequence of the stock split decided by the Board. It serves to attract more investors.
Tesla’s Board of Directors has approved a 5-for-1 stock split that will take effect on August 31st. The total share value for investors will not change, it will just be split across multiple shares.
The decision was made by the Board on Tuesday, August 11, and provides that on August 21, for every share held by a Tesla investor, five will be allotted to him. However, the dividend of the four additional shares will only be received at the close of August 28th, as the subsequent negotiations following the split will start from August 31st.
Why did Tesla do a 5 for 1 stock split?
The “stock split” is a tool used to increase the number of shares while leaving the total value of the shares held unchanged. The operation usually serves to lower the trading price of the stock and increase the liquidity of the shares.
In the release following the decision, Tesla’s board of directors makes it clear: it did so to “make stock ownership more accessible to employees and investors.”
After the announcement, Tesla’s stock price rose 8% before stabilizing anyway with a 6% rise to around $ 1,450. If hypothetically this value remained the same after the stock split by a factor of 5, the individual shares would have a unit value of $ 290.
Of course, as already explained, the total value of the shares held after the split will not change as a result of the operation itself.
Tesla simply wants to increase the number of possible investors, including the same employees who have a stock option offer but which, for the previous unit value per share, could have been difficult to access given the cost of about 1,450 dollars per share.