Tesla officially announced a three-for-one stock split, meaning the company’s stock price — which has jockeyed between $600 and $1,000 for a year — is about to get more affordable for investors.
The stock will begin trading on a split-adjusted basis on August 25th.
(TSLA) shareholders approved the split Thursday at the company’s annual shareholders’ meeting. Following the split, a person who owned one share of the company will hold three, and the price of each of those shares will be one-third of the price at that time. At Friday’s closing price of roughly $865, that would make the post-split price per share just about $288.
Stock splits are usually done to increase a stock’s liquidity, making it easier for investors to buy and sell the shares. Essentially, the move will triple the number of Tesla shares on the market, but the company’s overall valuation — and the value of each investor’s holding — won’t change. Splits can also boost demand for a stock because it puts the price within the reach of smaller, individual investors.
Tesla’s made such a move before, as recently as 2020.
Although deep-pocketed institutional investors don’t care as much about the company’s overall stock price, individual investors might be turned off by high-priced shares. The growth of zero-fee trading apps, including Robinhood, E-Trade and others, have made stock splits much more important in recent years.
When Tesla announced its intention to pursue a stock split earlier this year, it said in a regulatory filing it believes “the stock split would help reset the market price of our common stock so that our employees will have more flexibility in managing their equity, all of which, in our view, may help maximize stockholder value.”