August 25 (Reuters) – Tesla Inc (TSLA.O) Shares fell on Thursday as the world’s most valuable carmaker announced a three-for-one stock split to attract retail investors.
Shares of the Elon Musk-led electric carmaker opened at $302 and fell to $293 in early trading.
Tesla’s second stock split in as many years follows that of other high-growth companies, including Amazon.com. (AMZN.O) and Google-native Alphabet (GOOGL.O)and highlights the growing need to diversify the investor base.
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Art Hogan, chief market strategist at B. Riley, said the stock split is “certainly more attractive to retail investors and makes their options more affordable.”
“Retail investors are a very important group for Tesla, and today’s stock split is actually a recognition of that fact.”
Austin-based Tesla debuted at $17 in 2010, and its shares traded at more than $2,000 at their peak, making them the highest on Wall Street and making it difficult for small investors to bet on high growth rates.
In August 2020, the company decided to split its shares on a one-to-five basis, and in 2021 it exceeded $1 trillion in market capitalization.
The stock closed at $891.29 on Wednesday, with a three-for-one split taking effect.
The EV maker is the sixth company in the S&P 500 to issue a stock split this year, according to Howard Silverblatt, chief index analyst for S&P and Dow Jones Indices.
Tesla’s ticker was trending on social media stocktwits.com, indicating increased chatter among individual investors.
The company’s stock has fallen about 11% since it announced plans to increase its share count in March.
“In typical buy-the-rumor, sell-the-news fashion, investors tend to sharply reduce stock split purchases in the weeks following the effective split date, causing price momentum to slow,” analysts at Vanda Research noted. .
A stock split doesn’t affect the company’s bottom line, but it makes it easier for individual investors who want to make small trades. However, the benefits of stock splits are less clear as brokers allow clients to purchase a portion of a company’s stock.
Shares of Tesla have fallen nearly 16% this year as concerns about aggressive U.S. interest rate hikes and geopolitical uncertainty have led to a sell-off in high-growth stocks.
The latest three-for-one split means shareholders will receive two additional shares for each one they own starting in August. 17.
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Reporting by Akash Sriram and Medha Singh in Bengaluru; Additional reporting by Devik Jain; Edited by Sriraj Kalluvila
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