Tesla on Tuesday handed a reward to the army of enthusiastic retail investors who have helped lift its share price to dizzy heights this year, as it announced the first stock split in its history as a public company.
News of the US electric carmaker’s five-for-one split, to take effect on August 28, fuelled a 7 per cent jump in its shares in after-market trading on Tuesday.
In theory, the news of a share split should make no difference to the price, since it does not change the overall value of the business. But reducing the price of each share is often seen as a way to make them more attractive to small shareholders, as well as a sign of confidence by management in future market gains.
Tesla said it was making the split, which will take the form of a dividend distribution, “to make stock ownership more accessible to employees and investors”. After their latest bounce, however, the shares would still cost nearly $300 each after the split, based on current trading levels.
The company’s powerful stock rally this year has been accompanied by heavy retail investor buying. The number of accounts that hold Tesla shares on Robinhood — the commission-free trading service that has become a popular venue for active private investors in the US — has jumped to about 550,000, according to Robintrack, which has been reporting holdings. That is up from 180,000 in March, before the latest rally began.
Tesla’s announcement follows a broader run-up in tech stocks that has put the issue of share splits back in the limelight.
Apple announced a seven-for-one stock split two weeks ago as its shares hit a record above $400. Both Alphabet and Amazon have had stock splits in the past, but their shares currently trade at $1,480 and $3,080, respectively.
Tuesday’s after-market rally lifted Tesla’s shares to $1,475, an 87-fold increase from the $17 they were priced at in the company’s initial public offering in 2010.