A Tesla stock split is just weeks away, and investors no doubt are wondering how it will affect them.
The announcement, made during Tesla Inc. (NASDAQ: TSLA) on Tuesday, Aug. 11, surprised Wall Street.
The news pushed TSLA shares up about 6% in post-market trading (even though the stock split changes nothing fundamental about the stock).
And it ended the trading day Wednesday up a whopping 13%.
Theoretically, the move could mean more small investors could afford the stock, but those investors are minuscule compared to major institutions.
What's more, most brokerages offer fractional share-trading now anyway. So, most of those small investors can already buy a slice of expensive stocks for as little as $1.
But with stock splits now increasingly rare, it's a good idea to brush up on how these events work and what to expect.
Today we're going to answer all of your questions about the Tesla stock split.
The 2020 Tesla Stock Split Q&A
What is the Tesla stock split date?
Investors should make note of several dates:
- The record date is Aug. 21, 2020. You must own Tesla shares as of this date to be eligible to receive the additional shares created by the split.
- The split date is Aug. 28, 2020. That's the day the split takes place.
- The ex-date is Aug. 31, 2020. That's the day when TSLA shares will start trading at the new, split-adjusted price.
What's going to happen? Do I need to contact my broker?
This is a 5-to-1 split. Each investor will get four new shares of TSLA for each one they own now.
So, if you own 100 shares of TSLA now, you will own 500 shares after the split. However, the value of your stake will remain the same.
After the split, the Tesla stock price will be divided by four. So, if TSLA was trading at $1,500 before the split, it will trade at $300 after the split.
If you own $100,000 worth of Tesla now, you will still own $100,000 worth of Tesla after the split.
You do not need to contact your broker. The additional shares will be deposited into your account automatically. The changes will appear on your next monthly statement. Tesla has provided more detailed information here.
How will the split affect Tesla's dividend?
Since Tesla does not pay a dividend (yet), there's nothing to worry about on that front. But if it did pay a dividend of say, $1 per share, that would be divided by five during the stock split. That would make the next dividend $0.20 per share. Investors should receive the same total amount of money in dividends either way.
Will the split have any tax consequences for Tesla shareholders?
No, the IRS does not view a stock split as a taxable event.
What will happen to the Tesla stock price after the split?
Stock splits once were considered bullish for share prices. Now most market experts see little or no long-term impact. In Tesla's case, the split may be viewed as a vote of confidence by management in future stock gains.
Why is Tesla doing a stock split now?
Here's the reason given on the company website: "To make stock ownership more accessible to employees and investors." While many on Wall Street once felt that way, retail investors can now buy fractional shares. Tesla may be thinking of its share price as more of a psychological barrier. The split-adjusted price will look more "affordable."
Will the Tesla stock split have any impact on the stock market?
It shouldn't affect anything, but it could. Tesla is not a part of the S&P 500 or the Dow Jones Industrial Average. But after seeing the jump in Apple Inc. (NASDAQ: AAPL) and Tesla stock after announcing their most recent stock splits, other boards of directors may follow suit.
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How many times has Tesla stock split?
This month's event will be the first split in Tesla stock history.
Should I buy Tesla stock before or after the split?
Despite its stunning gains this year, TSLA still has abundant growth prospects. We recommend doing more fundamental research yourself, but the company is shipping more cars than ever, and that doesn't even include Model Y, Cybertruck, or the new Tesla Roadster sales yet.
Tesla also just recorded its first full year of fiscal profit over the last four quarters. So, many believe it could join the S&P 500 soon.
But it really doesn't matter whether you buy the stock before or after the split. You're going to own the same percentage of the company either way. And the value of your shares will appreciate or depreciate just as much as they would before or after the split. It all depends on how many cars, solar panels, batteries, etc. the company sells going forward.
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