Tesla’s stock price closed at $891.29 on Wednesday, August 24, and opened at around $302 on August 25. The drop in the price of Tesla shares by nearly 66% is due to the stock split of the company’s shares. Tesla’s stock on a split-adjusted price begins trading on August 25, 2022. After the stock split, the share price falls, however, there is no change in the market capitalization of the company as the number of outstanding shares get increased. “In terms of valuation, that should mean nothing. Instead of one share worth $900, you’ll have three shares worth $300 each. However, companies will often split their stock in hopes the lower price will bring more demand, pushing prices higher,” says Scott Sheridan, market expert, and CEO of tastyworks.
As of the record date of August 17, 2022, every shareholder got 2 additional shares of the company’s share for every one share held. After the closing session on August 24, the additional shares were to be credited to the shareholder account.
Elon Musk’s Tesla stock price may have become affordable to retail investors after the 3-for-1 stock split of the company’s shares.
But, does a stock split always works and brings in the demand from retail investors pushing the price upwards? “There are a number of instances where that has worked. Amazon recently did a split, and the stock has had a nice run after. Then there are instances where it doesn’t work as well. Take Alphabet, for example, where the stock really hasn’t gone anywhere,” informs Sheridan.
Still, going by the Tesla stock split history, the rise in share price was clearly evident when the company enacted a 5-for-1 stock split in August 2020. After the stock split by Tesla, from August 2020 to June 6, 2022, Tesla’s stock price rose nearly 43.5%. “If history repeats itself, then it’s entirely possible Tesla stock will move higher,” adds Sheridan.