August 25 (Reuters) – Tesla Inc. (TSLA.O) Stocks fell on Thursday as a three-for-one stock split announced by the world’s most valuable automaker to attract retail investors took effect.
Shares of the Elon Musk-led electric car maker opened at $302 and fell to $293 in early trading.
Tesla’s second stock split in as many years follows those of other high-growth companies, including Amazon.com (AMZN.O) and Google-parent Alphabet (GOOGL.O)and highlight the growing need to diversify the investor base.
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Stock splits “certainly have more appeal to retail investors and also make their options more affordable,” said Art Hogan, chief market strategist at B. Riley.
“Retail investors are a very important cohort for Tesla, and today’s stock split is essentially an acknowledgment of that fact.”
Austin-based Tesla had debuted at $17 in 2010 and the stock soared to trade over $2,000 at its peak, becoming one of the highest prices on Wall Street and making it difficult for small investors to bet on it. high-growth stocks.
In August 2020, the company decided to split its shares five-for-one and passed $1 trillion in market capitalization in 2021.
The stock closed at $891.29 on Wednesday before the three-for-one split took effect.
The electric-vehicle maker is the sixth company in the S&P 500 index to have split its shares this year, according to Howard Silverblatt, senior analyst for S&P and Dow Jones indices.
Tesla’s ticker was trending on social media stocktwits.com, signaling an increase in conversations among individual investors.
The company’s shares have fallen about 11% since the company announced plans in March to increase its number of shares.
“In typical buy the rumour, sell the news style, investors tend to sharply scale back purchases of split shares in the weeks after the effective split date, causing price momentum to slow,” they said. Vanda Research analysts in a note. .
A stock split doesn’t affect a company’s fundamentals, but it does make it easier for individual investors looking to make small deals. However, the benefits of stock splits are becoming less clear as brokerage houses allow clients to buy portions of a company’s stock.
Shares of Tesla have fallen about 16% this year as concerns about aggressive US interest rate hikes and geopolitical uncertainty triggered a sell-off in high-growth stocks.
The latest three-for-one split means shareholders will get two additional shares for every one they owned as of August 1. 17
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Reporting from Akash Sriram and Medha Singh in Bengaluru; Additional reporting by Devik Jain; Edited by Sriraj Kalluvila
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