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Why Tesla stock will cost much less?

As a result of very high growth, Tesla has seen its stock rise since its inception, and become one of the most popular stock values. But growing bigger means costing more, and a $200 share is much more affordable than a $2,000 share. For companies that wish to remain accessible to small wallets, a procedure is available and is called the “split”.

This is an operation consisting in dividing an action into several actions. Generally, a split consists in dividing a share to obtain four or five.

Shareholders don’t see any change in their shares, just that they own more shares at a lower price, no problem. A young investor with a share at 1000 dollars finds himself, for example, with four shares at 200 dollars. The total value is unchanged.

At Tesla, this phenomenon is organized again. This week, the automaker’s shareholders are gearing up to vote in favor of the deal, as Tesla’s stock price heads toward $1,000. In 2020, when Tesla’s share price reached $2,000, a split had already taken place to put the stock price at $400.

If the shareholder vote is in favor of the split, then the split will be 3 for 1. The result of the vote will be made public afterwards, on August 4th. In view of Tesla’s policy of wanting to be accessible to all on the stock market, to go all the more to seek capital and support its growth, the vote should be positive. Moreover, upstream of this information, the Tesla action rose.

Tesla stock goes up

A phenomenon parallel to the approach of a split, the stock market price of the companies concerned tends to increase. Shareholders assume that the split will breathe new life into a stock and that as the deal nears, the chances of short-term profits are high. It is enough to note that since the last operation of this kind at Tesla in 2020, the action has gained 100% in less than six months.

At the beginning of June, Amazon carried out a similar operation to go from a share of 2400 dollars to a share of 120 dollars. It was not its first operation either, since since its IPO in 1997 the e-commerce leader has already carried out 4 splits, going from a company with 509 million shares available on the markets to a company of 10.2 billion shares available on the markets.

The particularity of Amazon is that its first three splits followed each other closely, in the space of 15 months, from 1998 to 1999. The growth of the company was so strong that its action exploded and very quickly its prices did not were more feasible for smaller investors. It was at the time of the “internet bubble”.

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