The Tesla Stock Split Is Complete: 5 Things to Know About Wall Street’s Most Anticipated Split The Motley Fool
If there’s a key takeaway from this figure, it’s that Tesla’s share price is predominantly being driven by buyers and sellers — not short-selling or short-covering. While things have certainly not gone Wall Street’s way in 2022, the investing community has still managed to find a bright light amid a gloomy situation. This has been a challenging year in every sense of the word for Wall Street professionals and everyday investors. The cherry on top is the Federal Reserve is aggressively hiking rates into a steeply correcting market for the first time ever.
Although investors are hyped up at the moment, a stock split doesn’t mask the fact that one of the most widely held stocks on the planet is facing a slew of headwinds. Something for current and prospective investors to keep in mind is that stock quote providers, and even some online brokerages, can take a couple of hours to perhaps even a full day to recognize that a forward stock split has taken place. It’s possible you might wake up and see a quote for Tesla down 65% to 70%. It’s also possible the value of your portfolio could plummet if your online brokerage hasn’t properly adjusted for the coming stock split and Tesla represents a sizable position. Either way, these are nothing more than data errors that should be corrected within 24 hours.
What does the stock split mean for Tesla?
One of the easiest ways to gauge the investor sentiment of a publicly traded company is to examine the percentage of float held short. A “short-seller” is someone who benefits when the price of a security declines. Put simply, the higher the percentage of shares held short, relative to the tradable float, the more negative the perception of the company.
Pay attention to the key financial metrics, and then go beyond the numbers to determine if the company deserves a spot in your portfolio. If you do your research now, you can position yourself to attract market-beating returns that can get you one step closer to building wealth in the https://www.investorynews.com/ stock market over time. If you combine the performances of GM, Ford, and Volkswagen over the trailing 12 months, the cohort generated $559.37 billion in revenue and net income of $46.16 billion. Meanwhile, Tesla generated sales of $53.82 billion and net income of $5.52 billion.
- If you combine the performances of GM, Ford, and Volkswagen over the trailing 12 months, the cohort generated $559.37 billion in revenue and net income of $46.16 billion.
- Keep in mind that it can sometimes take stock quote providers and online brokerages a few hours to a full day to recognize that a stock split has taken place.
- One of the most important things to recognize about forward and reverse stock splits is that they have no effect on the operating performance of a publicly traded company.
- The cherry on top is the Federal Reserve is aggressively hiking rates into a steeply correcting market for the first time ever.
- Even with COVID-19 lockdowns hurting production at the Shanghai gigafactory, the company looks to be well on its way to reaching 1 million EVs produced and delivered in 2022.
The company has certainly done a great job of proving doubters wrong thus far. While the EV market is growing at a rapid clip and creating high-margin business opportunities, it’s worth noting that the automotive industry has historically been very competitive and relatively low margin. There’s also CEO Elon Musk, who the retail investor community has largely come to embrace as a visionary. Musk has overseen the introduction of four currently sold EV models, and has helped diversify his company to include energy storage products and solar panel installation. In addition to production advantages, Tesla’s batteries continue to be a bright spot in an increasingly crowded industry.
Tesla also expects that reducing the share price through a stock split will make its common stock more accessible to retail investors, which it sees as a positive development. For example, if you owned 20 shares of Tesla at $890 per share as of this past weekend, your split-adjusted stake would be 60 shares of Tesla held (three times your existing position) at $296.67 per share (a third of the previous price). You’ll note that Tesla’s market cap doesn’t change despite the share price https://www.forex-world.net/ and outstanding share count being adjusted. The company’s impending stock split won’t change the fact that shares are quite pricey, either. With the vast majority of auto stocks valued at a single-digit forward-year price-to-earnings (P/E) multiple, Tesla stands out like a sore thumb with its forward P/E ratio of 56. Even with Tesla diversifying some of its sales into energy storage and solar panel installation, this is a nosebleed premium bestowed by the investing community.
Tesla’s last stock split, on a 5-for-1 basis, was implemented in August 2020. Still, on the whole, the company’s shares have suffered a difficult 2022, falling more than 18% since the outset of the year. That drop is in line with each of the three major stock indexes, which have plummeted this year.
The vote increases Tesla’s authorized common shares from 2 billion to 6 billion. Tesla reports that had it had just over 1 billion common shares outstanding as of June 6, 2022. Conversely, Tesla’s share price will be reduced by a third following its August 24 close. Think of stock splits as nothing more than window dressing that allows companies to make their shares more accessible https://www.currency-trading.org/ for retail investors. It’s also a way of encouraging higher average trading volume, which CEOs like Elon Musk understand can keep Tesla at the heart of the conversation on online message boards and within investing communities. While the company does offer a sizable EV production advantage, both new and legacy auto stocks are catching up to Tesla when it comes to battery range.
Tesla Stock Split: 5 Things to Know About the Upcoming Split
Legacy automakers like General Motors and Ford Motor Company can be purchased for respective multiples of six and eight times Wall Street’s forward-year forecast earnings. These are companies with rich histories and strong brand awareness that are investing tens of billions of dollars to roll out new EVs and develop autonomous vehicles. This is a company focused on ramping up production at its Austin, Texas and Berlin-Brandenburg gigafactories, which were brought online earlier this year, as well as bringing new innovations to reality. Elon Musk’s forecast calls for the Cybertruck and Semi to enter production in 2023, and for the robotic humanoid Tesla Bot to make its debut sooner than later.
Tesla’s executive team always surprises the media with jaw-dropping news. On Monday, March 28, Tesla announced plans to pursue a stock split to provide shareholders with a stock dividend. Theoretically, the split means that more retail investors will be able to afford Tesla stock, but those investors are minuscule compared with institutional investors, and fractional shares were already available to smaller investors. As of August 25, a single share of Tesla should be considerably more affordable for everyday investors without access to fractional-share purchases through their online broker. The fourth thing to know about Tesla’s Aug. 25 stock split is that it’ll have absolutely no impact on the company’s day-to-day operations. That means it won’t impact the competitive advantages Tesla has ridden to one of the largest corporate valuations in the world.
It also indicates confidence that the share price will eventually rise to a level near or surpassing where it stood before the split. But the far bigger worry here is that Musk’s forward-looking statements, which play a key role in buoying Tesla’s pricey valuation, have a history of missing the mark. The Tesla stock split doesn’t change the fact that Musk’s empty promises could come back to bite shareholders. The fourth thing to note, following the completion of the Tesla stock split, is that the company remains exceptionally expensive, compared to legacy auto stocks.
The world’s most-valuable automaker is set to split its stock for the second time in two years.
Compared to most other EV offerings, the power, range, and capacity offered by Tesla’s batteries are superior. This is what’s helped create such incredible demand for the company’s EV lineup. Aside from the fact that no other auto company built itself from the ground up to mass production in over five decades, Tesla could reach an important psychological milestone this year. Even with COVID-19 lockdowns hurting production at the Shanghai gigafactory, the company looks to be well on its way to reaching 1 million EVs produced and delivered in 2022.
Behind the scenes of a stock split
When compared with the same quarter a year ago, Tesla profit had doubled and revenue had grown 42%, signaling strong growth over the long term. Investors will receive an additional two shares of Tesla for each one they already owned as of Aug. 17, 2022. Wall Street and the investing community have been dealt a difficult hand in 2022.
What usually happens to a stock after a split?
A “stock split” is what allows a publicly traded company to alter its share price and outstanding share count without affecting its market cap or operations. Forward stock splits help reduce the share price of a stock, while a reverse stock split can increase a publicly traded company’s share price. Forward stock splits are what usually get investors excited, because a company wouldn’t be enacting a split if it weren’t executing well and out-innovating its competition. One of the most important things to recognize about forward and reverse stock splits is that they have no effect on the operating performance of a publicly traded company. Adjusting the share price and outstanding share count amounts to window dressing.
After the 3-to-1 split, Tesla’s shares were trading at about $302, a third of where they stood prior to market open. Although a stock split sounds fancy, it’s not as glamorous as you may think. A stock split, in itself, won’t lead to millions of dollars in your account overnight. If you were hoping to go from rags to riches overnight, a stock split won’t do the trick. While Tesla undeniably holds a leadership position in the EV space, its stock remains a relatively high-risk investment. If you have an above-average tolerance for risk, and think that the company will go on to deliver more strong performances with its electric vehicles, battery technologies, and autonomous vehicle software, it could be a worthwhile long-term investment.
