According to a Monday filing at the Securities and Exchange Commission, Tesla Inc. wants to split its stock in order to pay its shareholders a stock dividend. It also said that the option would be raised at the annual shareholders meeting. The electric vehicle (EV) maker’s shares surged roughly 6.4 percent after the report. They traded at roughly $1,075 early session on Monday.
The filing states that Tesla would ask its shareholders “for an increase in the number of authorized shares of common stock” so that the car maker could allow the common stock to be split and the shareholders could get “a stock dividend.”
The filing has not provided details about the stock split, as yet. The shareholders’ meeting could be held in mid or even later in the year, by when more details are expected to be released.
A stock spilt reduces the cost to buy a company’s share. However, the company’s market value remains the same and Tesla was at over $1 trillion, at Friday close. In the current split proposal the shareholders will see an increase in the number of stocks they hold rather than a cash dividend but the share price will decline. However, markets generally respond positively to splits and share prices start rising after splits.
In August 2020, the EV maker had gone ahead with a five-for-one split. At that time Tesla Inc. had said that it wanted to make ownership of its stock “more accessible.” The spilt came into effect on August 31, of the same year and its share value is more than double, after this split.
The Monday announcement by Tesla comes at a time when the stock is on the wane. On Friday’s close it fell 4.4 percent in 2022. This sharply contrasts with 743.4 percent surge in 2020 and 49.8 percent rise in 2021. However, the company has seen a constant jump in share price in the past five years.
Since October 2019, Tesla has been showing a profit and its share price has increased dramatically. With the shift to and focus on electric vehicles, the company might see more growth though traditional automakers have started seriously exploring the electric vehicle industry, including luxury car makers.
