By Noel Randewich and Munsif Vengattil
(Reuters) – Tesla Inc on Tuesday announced a 5-for-one share split, causing shares of the electric car maker to recently rise 7% in expansion trading.
Tesla shares, trading at $ 1,475 after the announcement, were among the highest priced on Wall Street and the Palo Alto, California-based company said in a press release that it is looking to make its shares more accessible to employees and investors.
Shares of Tesla have risen more than 200% this year, while shares of General Motors and Ford Motor have fallen due to the effects of the coronavirus epidemic.
Stock splits are a way for companies to make stocks more accessible to retail investors, potentially attracting individual investors to make small trades. However, brokers increasingly allow clients to buy a share of the stock, making the benefits of a stock split less obvious than in the past.
Tesla says record holders on August 21 will receive 4 additional shares after the close of trading on August 28, with stock trading on a split adjustment basis. starting August 31.
Tesla’s stock split follows the four-to-one split, announced by Apple Inc in late July, the iPhone maker’s first stock split since 2014.
Stock splits have become rare on Wall Street in recent years, with just three S&P 500 components announcing splits in 2020, compared with the 10-a-year average over the past decade, according to S&P. Dow Jones Indices.
In July, Tesla announced second-quarter profits due to cost cuts and drastic deliveries that helped offset plant outages associated with coronaviruses, addressing a barrier that could lead to home deliveries. car manufacturers on the S&P 500 index.
While many institutional investors have avoided Tesla stock in recent years due to its inability to make steady returns, the company still has a large pool of individual investors.
For the past 30 days, Tesla has been second only to Apple as the most popular stock on the Robinhood trading app, according to Robintrack, a website that tracks the amount of Robinhood shares held by Robinhood.
Tesla’s stock split would not affect S&P Dow Jones Indices ‘potential decision to add the company to the S&P 500, as measured by the companies’ overall stock market value.
The stock split will not make Tesla any less expensive in terms of the actual income it gives investors. The stock is currently trading at 112 times its expected earnings over the next 12 months, according to Refinitiv. By comparison, GM is priced at eight times higher than expected earnings and Ford 45 times expected earnings.
(Reporting by Munsif Vengattil in Bengaluru and Noel Randewich in Oakland; Editing by Leslie Adler)