As the world’s most valuable automaker seeks to make its stock more accessible, shares of electric vehicle manufacturer Tesla surged in after-hours trading on Wednesday as the company’s 3:1 stock split went into effect.
Wednesday after market close, Tesla’s stock began trading on a split-adjusted basis, with each investor receiving around two more shares under the latest stock split, which was approved by shareholders earlier this month.
Investors favor stock splits because they feel they portend a bright outlook for a company’s future. No one divides a stock they believe will decline, after all.
Additionally, stock splits reduce the price of shares, making them potentially accessible to a broader range of individual investors. It also reduces the cost of trading stock options.
This is the second split
The first time Tesla split its stock, in August 2020, shares increased by an astounding 81% between the announcement of the split and the day of the split.
Since the announcement of the split in 2022, Tesla’s stock has increased by around 5 percent. The S&P 500 +0.29% is around 0.2% lower during the same time frame. The shares have outperformed, although not even close to the 2020 split level.
Several other prominent internet firms have announced stock splits this year, resulting in price increases for their shares, including Google’s parent company Alphabet in February and Amazon in March.
Tesla posted mixed results for the second quarter last month, which mainly above analyst projections. Analysts were concerned about the company’s production decline as a result of continuous supply chain disruptions and the shutdown of a plant in China owing to Covid-related government lockdowns.
Tesla’s quarterly sales of $16.9 billion increased by 42% year-over-year, but decreased from the previous quarter’s record high of $18.7 billion, breaking the company’s streak of record earnings.
