Tesla Surges Post Stock Split Announcement - Why?
Fiona Cincotta August 12, 2020 12:50 PM
Tesla jumps over 10% after announcing a stock split. Why the surge in demand?
Tesla has surged over 10% on Wednesday, year to date the stock is up 248% and across the past 12 months the share price has jumped over 555%.The world’s most valuable car makers announced that it will have a 5 – 1 stock split at the end of August.
The announcement comes hot on the heels of a similar announcement from Apple of a 4 – 1 stock split.
The number of shares in the company increase and the vale of those shares decrease
In Tesla’s case of a 5 – 1 split 100 shares at the current price of $1500 becomes 500 shares at $300 as the value of each share is reduced by 80%.
Whilst you would still own the same value of shares the number of shares that you own increases. This does not change anything fundamentally at the company.
After Tesla’s share value more than tripled this year the most obvious answer is to make the stock “more accessible to investors and employees”. Stock splits traditionally incentivise smaller retail investors. Individual investors like Tesla, on Robinhood Tesla trades second only to Apple and this move could make Tesla shares even more attractive. However, the fact that it is possible to trade fractions of a share raises doubts over this point.
Tesla shares jumped 10% to $1518, although this is still off the recent all time high of $1795 struck three weeks ago,
The rapid rally in the share price has been helped by the broad belief that Tesla has fixed past manufacturing problems and as it moves to widen its appeal to beyond the luxury niche. A solid recent financial performance with two straight quarters of profits now under its belt despite lockdown measures closing down its California factory.
S&P listing here we come
After two straight quarters of profitability Tesla is set to join the S&P. This means that many funds and institutional investors who previous had to avoid the stock will now be allowed to buy in. The decision is awaited.
The share price trades firmly its 50,100 & 200 daily moving average and above its ascending trendline, despite selling off since hitting its all time high in early July. The sell off has stalled and a move over resistance at $1564 could see more bulls jump in. Support can be seen at $1362. A break through this level could see the trendline support move into focus.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.