Tesla to Enact 5-for-1 Stock Split -- Update
By Maria Armental
Tesla Inc. said it would enact a 5-for-1 stock split after a
share-price surge over recent months vaulted the electric-vehicle
maker to the status of most-valuable car company as Chief Executive
Elon Musk navigated the pandemic.
Enthusiasm in Tesla's stock has been fueled by four consecutive
quarters of profit. The company's shares rose more than 6% in
after-hours trading following the announcement after closing lower
Tuesday at $1,374.39.
Tesla's move follows one from Apple Inc., which last month said
its board had approved a 4-for-1 stock split, aiming to make the
stock more accessible to a broader base of investors.
Tesla, which started trading publicly in 2010, has seen its
stock more than triple in value this year -- and rise nearly
sixfold over the past 12 months.
Mr. Musk, who has criticized the company's stock price as too
high, has said on Twitter that a split was worth discussing at the
company's annual shareholder meeting. That meeting has been pushed
back to September amid the pandemic. Several investors had urged
Mr. Musk to pursue a stock split.
The rise in Tesla shares has been driven in part by the start of
production late last year of the Model 3 sedan at a new factory in
China. Those deliveries helped offset the setback Tesla suffered in
March when officials in the San Francisco Bay Area ordered it to
stop production at its lone U.S. car assembly plant to battle the
Tesla this year also has started delivering the Model Y compact
sport-utility vehicle. The SUV's order backlog secured before the
pandemic helped sustain deliveries when many prospective new car
buyers were stuck at home.
The company, as part of Mr. Musk's effort to turn Tesla from a
niche car company into a mainstream vehicle maker, is pressing
ahead with the construction of its first European factory near
Berlin and last month said it would build another in the U.S. in
Austin, Texas, one of the few new major car assembly plants to be
built in the U.S. in the past decade.
Stock splits don't change anything fundamentally about a company
or its valuation, although they tend to generate a short-term pop
in a company's stock price. They can also help entice investors who
might be put off by a high share price. But brokerages such as
Charles Schwab Corp. now give clients the option of buying a
fraction of a share for as little as $5, opening up a range of
pricey stocks to mom-and-pop investors.
Once common among companies when their shares topped $100, stock
splits became less prevalent after the dot-com bust in 2000. This
year just three companies in the S&P 500, including Apple, have
unveiled plans for share splits, down from 102 in 1997 and seven in
2016, according to Charles Schwab. Executives from Target Co. and
PepsiCo Inc. are among those that have recently dismissed the need
for a stock split.
Tesla said it was pursuing the split "to make stock ownership
more accessible to employees and investors." The company said
shareholders on Aug. 21 will benefit from the split and that its
stock will trade on the adjusted basis on Aug. 31.
Michael Wursthorn and Tim Higgins contributed to this
Write to Maria Armental at email@example.com
(END) Dow Jones Newswires
August 11, 2020 18:59 ET (22:59 GMT)
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