Tesla split its shares. This is what that means

Tesla split its shares when the market opened on Thursday, joining companies like Amazon and Alphabet, Google’s parent company, who have chopped up shares this year to lower their price and make them more accessible to investors.

After the 3-for-1 split, Tesla shares traded at about $302, a third of where they stood before the market opened. The stock later fell to about $296.

Investors received two additional shares for each share they owned before the split. Each of the three shares is valued at one-third of its original price, with the total value of a shareholder’s share remaining unchanged.

The stock split has largely gone out of fashion in corporate America. However, stocks usually rise during the year after a split, according to: a survey conducted by Nasdaq.

Investors who held Tesla stock on August 17 will be eligible for the additional shares.

What does the stock split mean for Tesla?

Typically a stock split indicates optimism in a company. It also indicates confidence that the stock price will eventually rise to a level close to or higher than the level before the split.

Recent Tesla stock performance supports such an interpretation. Tesla stock has surged in the past month, rising more than 6% from early trading on Tuesday. Prior to a decline last week, the stock was up more than 13% since a month ago.

The company last month reported mixed results for the second quarterwhich showed a nearly one-third drop in profits from the previous three-month period, due in part to production delays at a factory in Shanghai amid COVID lockdowns.

PHOTO: Electric vehicles are charged at Tesla supercharger site in Hawthorne, California, Aug. 9, 2022.

Electric vehicles are being charged at the Tesla supercharger site in Hawthorne, California, Aug. 9, 2022.

Patrick T. Fallon/AFP via Getty Images, FILE

Compared to the same quarter a year ago, Tesla’s profits had doubled and sales were up 42%, indicating strong long-term growth.

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Still, overall, the company’s stock has had a difficult 2022, dropping more than 18% since the start of the year. That drop is in line with each of the three major stock indices, which plunged this year.

What usually happens to a stock after a split?

Stock splits usually lead to an increase in the price of stocks, according toa Nasdaq investigation that examined stock splits at major companies between 2012 and 2018. Even the mere announcement of a stock split produced an average price increase of 2.5% for a stock, the Nasdaq found; and a year after a stock split, the stock saw an average price increase of almost 5%.

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