Tesla splits stock to make lofty shares attainable again

SAN FRANCISCO • Tesla Inc is splitting its richly valued shares in a 5-for-1 exchange, a move designed to make the stock less expensive for individual investors after the company become the world’s most valuable automaker.

Each stockholder of record on Aug 21 will receive a dividend of four additional shares of common stock for each one they own, the electric-vehicle (EV) carmaker said in a statement. The shares, which have more than quadrupled since March to close above US$1,600 (RM6,720) last month, rose 7% before the start of regular trading yesterday.

The split aims to capitalise on and support Tesla’s recent surge, which has pushed its market capitalisation to more than US$256 billion, exceeding the value of Toyota Motor Corp and Ford Motor Co combined. The massive rally for the shares has priced them out of reach for some smaller retail investors just as the EV industry is capturing their imagination.

“At a time where the appetite for the stock and overall EV story continues to gain momentum, I think it’s a smart move,” said Dan Ives, an analyst at Wedbush Securities Inc who rates the shares the equivalent of a ‘Hold’. Tesla is taking after Apple Inc, which Ives said other tech giants are likely to emulate.

Apple announced a 4-for-1 stock split after the close on July 30 and retail traders have piled in to bet on further gains. Tesla will start trading on a split-adjusted basis on Aug 31.

Tesla has been a favourite stock for day traders and other retail investors lately. At one point last month, nearly 40,000 Robinhood account holders added shares of the carmaker during a four-hour span. The surge has been a boon to other EV companies, some of which have yet to actually produce a vehicle.

“The stock split is a recognition of the fact that the market is increasingly influenced by individual investors, including those looking to gain exposure to next-generation transportation,” Ben Kallo, a Robert W Baird & Co Inc analyst who rates Tesla the equivalent of a ‘Hold’, wrote to clients.

Tesla’s gains have been partly fuelled by speculation the company is likely to join the S&P 500 after it reported the latest in a string of profitable quarters. That would make the stock a must-buy for mutual and exchange-traded funds that seek to mimic the benchmark index. — Bloomberg