A stock split is one of the best ways to attract more investors and Tesla is paving the path for the same. It will be seeking the approval of shareholders before taking the step of increasing the number of counts. Several companies in recent years have practiced splitting of stocks to take the market advantage.
A vote is on the card at the annual shareholders' meet and it is believed the stock split may take place soon. The board of directors needs to approve before Tesla offers multiple shares against each unit to the shareholders.
Splitting makes the shares cheaper and appeals tomoreinvestors even though it does not result in any change in the underlying fundamentals.
A study reveals the stock split moves are historically bullish for the companies and the average returns after about a year have been 25 percent versus just 9 percent for the overall market.
With the announcement of a stock split, the shares of Tesla jumped 8 percent and added more than $100 billion to its market value.
Amazon announced a stock split earlier this year and since then has surged about 20 percent. The split will come into effect in June this year.
Tesla became a constituent of the S&P 500 last December and is now considered a heavy-weight stock on the index. It accounts for more than 2 percent of it and gained 300 percent since the first announcement was made about the split in August 2020.
Some companies from the S&P 500 index believed to be following the footstep of Tesla include Chipotle Mexican Grill and Booking Holdings.
Meanwhile, Tesla is emphasizing the expansion of its factories and to enhance production volume due to high demands for its electric vehicles from across the world. The supply chain issue has been one of the biggest problems for the company in the past two years. It is simultaneously working on reducing the issue.