Tesla stock | After the stock split, Tesla hopes that more investors will join the ride.

Tesla shares are about to become more affordable, unlike its automobiles.



Unlike its vehicles, Tesla shares are about to become more affordable.


After the market closes on Tuesday, investors will receive two additional Tesla shares for each one they already owned on August 17 as a result of Tesla's 3-for-1 stock split. Theoretically, that ought to cause Tesla's stock price to decline by almost two-thirds before trading begins on Wednesday.


Stock splits don't increase a company's worth or profitability. Tesla divided its expensive shares this year, joining other market titans Amazon and Google parent Alphabet in doing so. Even GameStop, the darling of meme stock, split its stock.

Companies utilize stock splits when the price of their stock rises above the level at which individual shares may be purchased by retail investors, or when they want to issue more shares to the public to facilitate trading.


If new investors drive the price up, stockholders who own the company may also benefit. The shares should be simpler to sell as a result of the lower prices.


When Tesla revealed its intention to divide the stock in March, shares were trading for more than $1,000. For most individual investors, that is a little high. Some brokerages, but not all, allow investors to purchase fractions of shares.

Stock splits are used by companies when the price of their stock goes above the point at which retail investors can buy individual shares or when they want to issue more shares to the public to help with trading.


The company's stockholders could gain if new investors raise the price. The decreased pricing should make it easier to sell the shares.


Shares of Tesla were trading for more than $1,000 when the company announced in March that it would be dividing the stock. That is a little expensive for the majority of individual investors. Investors can buy fractional shares at some brokerages, but not all of them.


But with Musk at the wheel, things may turn rough. Musk reached an agreement to purchase the social media site Twitter in April. Some Tesla shareholders reduced their holdings out of concern that, should the purchase go through, Musk would be preoccupied with operating Tesla. In late May, the price of the shares hit $620.


Since then, Musk has changed his mind and wants out of the agreement. In October, the case will be heard in court. Better-than-expected second-quarter profits and a general uptrend in the stock market helped Tesla's stock start to rebound in July.


OTHER NOTABLE COMPANIES SPLIT STOCK; DO ANY OTHERS?

In recent months, both Amazon and Alphabet, the parent company of Google, split their stock 20 to 1. After the initial shock of the pandemic, both firms were caught up in a massive rally for large technology corporations, and their shares rose north of $2,000 each.


The price of Alphabet's stock has increased by 2% since its stock split became effective on July 18, although it is still down by around 20% year to date. In the second quarter, Google's revenue growth was the slowest it has been in the previous two years, a hint that the pandemic's tailwinds have changed to one that is more difficult to navigate.

Though Amazon has experienced issues, similar to Alphabet, and its price is down about 20% year to date, its shares have increased by almost 9% since the split went into effect on June 6. Consumers are now spending more money on services and less money on things. Like many businesses, Amazon has experienced a sharp increase in its expenses.


Even GameStop, the so-called meme stock that reached absurd heights last year before partially plummeting to earth, opted to divide its shares. However, in the instance of GameStop, it had been retail investors who had initially driven the stock higher.


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