Tesla boosts turbocharged stock with plan for 5-for-1 split

SAN RAMON, CALIFORNIA (AP) — Tesla will split its stock for the first time in its history so more investors can afford to buy a stake in the electric car pioneer following a meteoric rise in its market value.

The five-for-one stock split announced on Tuesday will not change how much Tesla’s business is worth, but will automatically reduce the price of its shares by 80 per cent when it is completed on August 31.

The sharp drop in price per shares creates a wider universe of potential investors and also often has the psychological effect of making it seem as if a stock is on sale. Those factors often spark rallies after a split is announced. For instance, Apple’s stock price surged by 14 per cent since the iPhone maker disclosed a four-for-one split less than two weeks ago.

Now, it appears Tesla is about benefit from the same phenomenon. The company’s shares surged six per cent to USD1,459 in extended trading after the news about the split
came out.

It marks the first time that Tesla split its stock since the Palo Alto, California, company went public at USD17 per share a decade ago. Any investor who bought USD10,000 worth of stock at that IPO price and would now have stock worth about USD860,000.

The company logo appears on a 2020 Model X. PHOTO: AP

Tesla’s shares already tripled so far this year to give the automaker a market value of USD256 billion — nearly three times more than the combined value of long-established rivals Ford Motor, General Motors and Fiat Chrysler.

The rapid run-up in Tesla’s stock has been propelled by a widening belief that the company has fixed its past manufacturing problems. It is also seen as moving to widen the appeal of its vehicles beyond the luxury niche with a series of new models.

Tesla also has been able to reverse a long history of losses under its eccentric CEO and co-founder Elon Musk to post four consecutive quarters of profits.

The company’s financial turnaround has qualified Musk for two lucrative awards valued at nearly USD3 billion since May.