Tesla shares rose on Monday after the electric vehicle manufacturer announced plans for a stock split, the second in two years.
In an 8-K filing with the Securities and Exchange Commission, the business TSLA, 7.20 percent stated that it will seek shareholders to approve an increase in the number of shares outstanding. The proposal will be made during the company’s 2022 annual shareholders meeting, which is scheduled to take place in October.
In early trade, the stock gained 5.9 percent, putting it on track for its biggest finish since January 12. It lost 0.3 percent on Friday, snapping an eight-day gaining streak. Monday’s rise came despite news that Tesla may halt manufacturing in China due to new COVID-19 lockdowns.
As of January 31, Tesla has 1.033 billion shares outstanding. The corporation said in the 2021 proxy statement that it is permitted to have 2.00 billion shares outstanding.
The only previous stock split implemented by the corporation was a 5-to-1 split on August 31, 2020. At the time, the stock was selling for around $2,213 before the split. The shares closed on August 31 at a split-adjusted price of $498.32.
To get the stock price down to that level, Tesla would need to raise the number of shares it is permitted to have outstanding by more than one billion, allowing it to do a 2-for-1 split. The number of authorized shares outstanding would have to grow by more than 3 billion to equal the previous 5-for-1 split.
Although a stock split changes nothing about a company’s fundamentals, it has traditionally helped increase the stock price since it is perceived as a show of management’s confidence that the stock will continue to perform well, as MarketWatch’s Mark Hulbert has written.
Tesla’s shares had risen 78 percent after the firm announced after the Aug. 11 close that it had authorized a 5-for-1 stock split until Aug. 31, but then dropped 33.7 percent in the following week. The stock didn’t close above its August 31 closing price again until November 19.
Wedbush analyst Dan Ives feels a stock split would be a “sensible strategic move” for Tesla, after similar moves announced by Alphabet Inc this year. GOOGL is down 1.03 percent. Amazon.com Inc. AMZN, -0.90 percent, and Google Inc. GOOG, -0.90 percent He feels that a split will benefit Tesla’s shares in the long run.