Tesla has officially announced an upcoming shareholder vote for a potential stock split later this year. If shareholders approve of the move, it will be Tesla's second stock split in two years. Wedbush Securities Managing Director Dan Ives joins the hosts at Yahoo! Finance to talk about what this all means for people invested in – or perhaps planning to invest in – Tesla's stock.
Tesla's shares have spiked since it announced the plan to split the stock yet again. Not long ago, some vocal Tesla fans and owners were pushing CEO Elon Musk to consider a split, though he said there were no plans in place. This, all at a time when the stock was much higher than it has been of late.
Since then, the stock dropped significantly, as did most of the market. However, since the automaker opened its German factory and announced the potential split, the stock has been rising quickly. Ives told Yahoo Finance:
"Tesla right now is in a massive position of strength in terms of where they're heading from a manufacturing perspective, in terms of Berlin, as well as Austin and overall demand."
For those unaware, a stock split wouldn't change the overall worth of investors' holdings in Tesla. Rather, it would just reduce the share price. Tesla stock is expensive, and as the price continues to rise, it's more difficult for retail investors to add it to their portfolios.
Musk has made it clear in the past that he wants retail investors to be able to invest in his companies' stock. He's also noted on some occasions that he thinks Tesla's share price is too high, at least in his personal opinion.
Ives explained in the interview:
"They have that high-class problem of a four-digit stock. And I think it's something where you could always have the debate, but a stock split is a smart strategic move for Tesla, just like it was for Amazon, just like it was for Google, as well as for Apple."
There are few details about the split at this time. Tesla will ask shareholders to vote on the split at the 2022 meeting, which is expected to happen in June. However, there is currently no meeting scheduled. Reportedly, the 2022 proxy will become available by May 2, 2022.
The last time Tesla split the stock, it was a 5:1 split. Tesla investor Gary Black, a fund manager with years of experience on Wall Street, expects a 10:1 split this time.
Ives went on to talk about the stock, the choice to invest in it, and why. He added:
"You don't buy it because of a stock split. You buy it because fundamentally where you think it's gonna go, but the stock split is gonna be something that is a catalyst. It's been rumored for the last four or five months. And I think it was smart to get out there."
The Wedbush Securities Manager thinks Tesla's timing here is "bullish." He points to Tesla's grand opening in Berlin, as well as the upcoming official opening of the company's new factory in Texas. Ives continued:
"[A] company that's gonna do their second split in two years is not doing it because they're in a position of weakness. I think it shows position of strength, confidence."
What do you think? Is Tesla in a position of confidence, or does a potential stock split signal some insecurity about what the future holds? State a conversation in our comment section below.