Tesla (NASDAQ: TSLA) is one of the most watched companies in the stock market. It is rare for investors Not to comment on CEO Elon Musk and his company, whether it’s a positive or a negative opinion. In just over a decade, however, Tesla went from a cranky, cocky emerging company to an industry leader.
Tesla has a habit of regularly breaking new milestones in the past, typically in a dramatic fashion. Even so, it still surprised many people when Tesla opted to split stock for the first time in its history as a publicly traded company. If you’re seeing Tesla as a potential buy right now, you’re probably asking yourself an important question: Should you buy the stock before the stock split happens, or wait until you have one. Can you invest with a lower stock price? Tesla has never performed a stock split before, so history cannot guide us. However, the answer lies in the short-term market sentiment rather than the fundamental long-term business outlook.
Is it reasonable to buy before splitting or waiting?
Recently, apple (NASDAQ: AAPL) made a similar decision to do a stock split. Unlike Tesla, Apple has split before, but it’s been six years since they last made such a move. When looking at its history of stock splits, Apple shares seem to follow a pattern:
- In the period from the announcement of the split to the effective date, the stock has a good uptrend.
- In the few days after the split occurs, there is usually another significant rally in stock prices.
- Following the immediate consequences of the split, the stock tends to settle for a short while before resuming any of the trends it saw prior to the announcement of the stock split.
We certainly saw the first part of that roadmap for Tesla. The first day after the electric scooter maker announced the split, shares were up 13%. Investors will have a few more weeks to trade the stock on a split basis before August 31, when the Nasdaq Stock Exchange will begin listing prices that reflect a new share issue related to the split. Cup.
By that logic, you missed a key part of the split-related push for Tesla not owning it prior to the announcement. However, many traders will still try to make a few more dollars in profit by timing Tesla. They may not even necessarily be interested in holding the stock for the long term, instead looking to get out before the positive sentiment from the split disappears.
What may you do?
Whether you should buy Tesla now or in the future depends in part on how much money you have to invest and how your broker will allow you to. If you don’t have between $ 1,500 and $ 1,600 to buy a full stock of Tesla at recent prices, then you’ll need to find out if your broker allows you to buy fractional stock. If not, then you’re out of luck – and you’ll need to wait until the 5-to-1 goes into effect. At that point, you’ll be able to invest as little as $ 300 or so to buy a share of the newly split Tesla stock.
If you can buy fractional stocks, the timing of your investment is not that important. If you pay $ 300 to $ 320 now for 1/5 of the stock before the split, you will get the full share of the stock after the split is in effect (assuming the price stays steady; no guarantees say it will happen to any stock and Tesla in particular has had a wild year). Alternatively, you can pay about $ 300 to $ 320 per share after splitting if you wait. At any rate, the stock price will inevitably change between now and then, but there is no sure way to predict whether it will rise sharply, higher, lower or just move gently. either way.
The most important consideration
For long term investors, no short-term move is important. Let’s look at what happened on Tesla’s first trading day after the IPO. Participants in the initial public offering had to buy shares at $ 17 per share, but on the open market, the share price rose 40 percent and closed at nearly $ 24 per share. That was a huge difference at the time.
Now, however, buyers back then didn’t see much difference. It doesn’t matter if someone has a return on their Tesla stock of $ 1,531 / share or $ 1,538 / share. It is important that all shareholders enjoy a huge return.
Similarly, people looking to invest in Tesla today should focus on the company’s long-term potential. The new car release will likely increase Tesla’s popularity and expand the addressable market. Technological advances will be used in ancillary businesses, promoting new centers of profit. Production expansion will drive faster growth. The potential in each of these areas is what drives Tesla’s value.
Make smart investment decisions
If you think Tesla has what it takes to keep growing, there’s no good reason to wait to buy stock. But you should also look to further increase your position in your favorite stocks over time. Whether you buy it today or wait a few weeks won’t make much difference 5 or 10 years from now.