Tesla adds $112 billion in value after tweet
Tesla added about $US84 billion ($112 billion) to its stock-market value on Monday in New York, more than Ford’s entire market capitalisation, after the electric-vehicle maker said it is planning a second stock split in about two years.
Stocks splits for large companies have returned to the spotlight recently with Amazon.com saying earlier this month that it will do a 20-for-1 stock split, followed by Alphabet’s own plan announced in February, as these companies try to make their lofty stocks more attractive for individual investors.
Tesla has signalled it is eyeing another stock split.Credit:AP
The news, announced via a tweet, helped to add further fuel to a recent rally in Tesla’s stock. The company is the biggest gainer on the NYSE FANG+ Index this year. On Monday, the shares closed up 8 per cent at $US1,091.84, the highest level since January 12.
The proposal, first announced on Twitter, has been approved by its board and shareholders will vote on it at an annual meeting. The stock split, if approved, would be the latest after a five-for-one split in August 2020 that made Tesla shares cheaper for its employees and investors. Its share price rose a staggering 743 per cent that year, and the split was often cited among one of the reasons that drove the gains.
The plan came as the company suspended its Shanghai factory amid COVID-19-related lockdown measures and its artificial intelligence head took a sabbatical as the company aims to achieve full self-driving capability this year.
Following a pandemic-induced rally in the technology shares, Alphabet, Amazon.com Inc and Apple , too, have in the recent past split their shares to make them more affordable.
Tesla debuted at $US17 per share in 2010. Following its 2020 5-for-1 stock split it is trading above $US1,000, equivalent to over $US5,000 on a pre-stock split basis.
While there are few details on Tesla’s plan, analysts weren’t surprised that the announcement spurred the stock higher.
“A lot of people consider this to be a classic example of market psychology at work. If you look historically over time, most companies do well and perform well — and in some instances very well — following the announcement of stock splits,” said The Strategic Funds managing director Marc LoPresti.
“In a case like this, Elon Musk is absolutely brilliant at market psychology. He’s one of the masters of market psychology.”
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