Tesla boosts turbocharged stock with plan for 5-for-1 split | Inquirer Technology
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Tesla boosts turbocharged stock with plan for 5-for-1 split

/ 08:25 AM August 12, 2020
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AFP

SAN RAMON, California — Tesla will split its stock for the first time in its history so more investors can afford to buy a stake in the electric car pioneer following a meteoric rise in its market value.

The five-for-one stock split announced Tuesday won’t change how much Tesla’s business is worth, but will automatically reduce the price of its shares by 80% when it’s completed on Aug. 31.

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The sharp drop in price per shares creates a wider universe of potential investors and also often has the psychological effect of making it seem as if a stock is on sale. Those factors often spark rallies after a split is announced. For instance, Apple’s stock price has surged by 14% since the iPhone maker disclosed a four-for-one split less than two weeks ago.

Now, it appears Tesla is about to benefit from the same phenomenon. The company’s shares surged 6% to $1,459 in extended trading after the news about the split came out.

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It marks the first time that Tesla has split its stock since the Palo Alto, California, company went public at $17 per share a decade ago. Any investor who bought $10,000 worth of stock at that IPO price and would now have stock worth about $860,000.

Tesla’s shares already have tripled so far this year to give the automaker a market value of $256 billion — nearly three times more than the combined value of long-established rivals Ford Motor, General Motors and Fiat Chrysler.

The rapid run-up in Tesla’s stock has been propelled by a widening belief that the company has fixed its past manufacturing problems. It is also seen as moving to widen the appeal of its vehicles beyond the luxury niche with a series of new models.

Tesla also has been able to reverse a long history of losses under its eccentric CEO and co-founder, Elon Musk, to post four consecutive quarters of profits.

The company’s financial turnaround has qualified Musk for two lucrative awards valued at nearly $3 billion since May.

TOPICS: Electric Car, Tesla
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