Tesla has announced plans for a second stock split in less than two years, following the five-for-one split initiated in August 2020. The electric vehicle manufacturer has made its intention public via a post on its official Twitter page today.
"Tesla will ask shareholders to vote at this year’s annual meeting to authorize additional shares in order to enable a stock split."
The automaker revealed more details about the planned stock split in an 8K form filed with the Securities and Exchange Commission (SEC) earlier today.
"On March 28, 2022, Tesla, Inc. announced its plan to request stockholder approval at the upcoming 2022 Annual Meeting of Stockholders for an increase in the number of authorized shares of common stock through an amendment to the Company’s Amended and Restated Certificate of Incorporation in order to enable a stock split of the Company’s common stock in the form of a stock dividend. Tesla’s Board of Directors has approved the management proposal, but the stock dividend will be contingent on final Board approval."
The company said it would release additional details in a definitive proxy statement relating to the annual meeting. Expect more details at Tesla's annual shareholder's meeting; no date has been confirmed, but in the previous years the meeting has been held in June (2017–2019), September (2020), and October (2021).
The announcement sent Tesla's stock price up 7%, with shares trading at about $1,080 a share at the time of writing (March 28, 2022).
When Tesla announced the previous five-for-one stock split in August 2020, shares were trading at about $1,370, but the stock split announcement sent the share price to a record high of $2,000. After the split, the price per share was reset at around $460.
The stock has more than doubled in value since, with Tesla's market capitalization topping $1 trillion for the first time in October 2021; the current market cap is $1.12 trillion.
Companies generally announce stock splits to make their price per share more affordable after their stock has risen significantly in value. A split makes the stock more accessible to smaller individual investors, helping increase trading.
That said, there's an increasing number of brokers offering individual investors the purchase of fractional shares on high-priced stocks like Tesla's. Besides making the stock more affordable to investors, a split also helps a company get included in the Dow Jones Industrial Average, which supports the value of a stock as many investment firms track the index.