This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Tesla Inc (NASDAQ: TSLA) after markets closed Tuesday announced a planned five-for-one stock split, a move that could make the stock more attractive to price-sensitive investors.
Shares of Tesla have had an incredible run in 2020, up 229% year to date. The stock closed Tuesday at $1,374.39 apiece, well above its $211 52-week low. Although stock investing 101 teaches to ignore share price and instead rely on valuation metrics, some investors anchor in on share prices, tending to shy away from high numbers.
A stock split reduces the price of a stock without changing the value of the investment. In Tesla’s case, the company intends for holders as of August 21 to receive four additional shares for every one they own. At Tuesday’s closing price, each of those five shares (four additional + the original share held) would be worth about $274.88, for total consideration matching the current share price.
While the value of an investment in Tesla shouldn’t change due to the split, the lower price could attract new investors to the stock.
Shares of Tesla traded up 7% in after-hours trading, adding more than $15 billion to the company’s market capitalisation despite no change to the automaker’s fundamentals. For context, the market cap of fellow automaker Fiat Chrysler Automobiles (NYSE: FCAU) is currently $23 billion.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
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More reading
- Why Tesla stock jumped 32.5% in July
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- ASX investors have been buying Tesla and these international shares
- ASX investors were buying these 5 international shares last week
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
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