Big Changes Ahead for Tesla Stock
Tesla Stock has been on nothing but a climb over the last three months. Effectively tripling it’s value and blowing everyone away with its performance. Even with that metric, CEO and Founder Elon Musk, has been pretty vocal about some issues he has with its performance.
You might think that he would be talking about how long it took or that he thinks it should be valued at more. After all, Elon Musk has always been outspoken about his company, for good and for bad.
However, that’s not the case with his opinion on the stock performance. He actually wanted to see more people being able to invest in the company, and when your stock is pushing $1700, that’s a tough sell. Most casual investors cannot afford that steep price request.
Tesla stock will be split up, with dividends paid out to current holders
Musk has been frequently vocal about how he wishes more people could afford to invest in Tesla. Which makes total sense, it’s nice to have a valuable stock but it doesn’t mean much when your average joe can’t support you.
With that in mind, Elon Musk officially announced that Tesla Stock will be taking a Five-For-One Split after the market closes on August 31st. But, what does that really mean for the company and prospective investors?
Effectively, it means exactly what it sounds like. Tesla stock will be split up, with dividends paid out to current holders in order to increase the investor portfolio. Stock splits like this make it much easier for employees to earn stocks for the companies they work for. Additionally it makes stocks much less expensive to invest in, without having to go into the deep end of fractional shares.
Tesla’s magical 500%+ stock rally was largely driven by short covering, as it was at one point the most betted against stocks.
When shorts cover, that induces a buying frenzy and sends prices higher.
But the price now is disconnected from reality.https://t.co/sDB1lZQ9FN
— 🌿 𝐕𝖊𝖌𝖆𝖓𝖎𝖈 🌿 (@vegix) July 27, 2020
why are companies suddenly deciding on this seemingly consumer friendly stock portfolio
Apple announced a similar move starting in the same quarter with a Four-For-One stock split for the same reasons. Establishing that this may be a trend that we see from other high level companies as well. With rumors that we could see this from businesses like Amazon.
Why though, why are companies suddenly deciding on this seemingly consumer friendly stock portfolio? Well, it’s actually pretty simple. With COVID being the cause of the recent stock market crash of 2020 and several people receiving Government money, there’s loose cash all over the place.
Because of the pandemic, most apartment complexes, auto insurance companies and banks were giving people grace periods. Some were even giving customers outright forgiveness for a few months on their loans. So, even though people found themselves out of a job, they now had a few thousand dollars in their pockets.
Combine that with stocks suddenly becoming readily accessible and affordable to everyone, and you get a recipe for success. Overall, it makes sense to diversify and give more people options to buy into your successful company. Capitalize on a market that only has X amount of opportunities while you can.