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Mar 29, 2022

Tesla latest mega-cap to announce stock-split plans

If approved, split would be second at electric carmaker since 2020

Tesla is seeking shareholder approval for its second stock split since 2020, with the firm saying it wants to do so through a stock dividend.

Shareholders will vote on the proposal at Tesla’s AGM later this year. Its first stock split came in summer 2020, when it executed a five-for-one split at a time when shares were trading above $2,000 each and Tesla was preparing for inclusion in the S&P 500 benchmark, which it joined in December the same year.

A mega-cap trend

The news is seemingly part of a trend at mega-cap companies, with Elon Musk’s carmaker just the latest to announce such plans. Amazon revealed plans for a 20-for-one stock split and a $10 bn share buyback plan earlier this month, following a similar move by Google’s parent Alphabet in February.

The past two years have also seen stock splits from Apple and Nvidia, with issuers all seeking to make high share prices more appealing to investors.

Reuters cited a Bank of America Global Research note as saying that although stock splits lower the cost of shares, such moves ‘historically are bullish’ for companies that enact them, ‘with shares marking average returns of 25 percent one year later versus 9 percent for the market overall’.

Tesla’s share price jumped 8 percent on yesterday’s news, adding more than $100 bn to its stock market value. Reuters says the carmaker has surged around 300 percent since announcing its first stock split in August 2020.

Garnet Roach

An award-winning journalist, Garnet Roach joined IR Magazine in October 2012, working on both the editorial and research sides of the publication. Prior to entering the world of investor relations, her freelance career covered a broad range of...