The electric car company completed a 3-for-1 stock split after the closing bell on Wednesday. So a share now costs a third of what it cost a day ago. Tesla ( TSLA ) closed Wednesday around $891, which means it should open around $300 on Thursday morning. Tesla approved the split in June, the second of its kind in the past two years. But before you start celebrating how Tesla stock is now “cheaper,” keep in mind that nothing has changed with Tesla’s valuation. The company is still worth more than $930 billion after the split. The stock continues to trade at a lofty multiple of more than 70 times 2022 earnings forecasts, a big premium to the valuations of traditional auto companies like Ford ( F ), GM ( GM ), Volkswagen ( VLKAF ) and Toyota (TM). And shares are still down about 15% this year as investors worry about growing competition in the electric vehicle market from traditional automakers, as well as Musk’s many potential distractions. (SpaceX. The Boring Company. The Twitter Takeover Soap Opera (TWTR). The list goes on.)
The only thing the stock split has changed is that existing investors now own three times as much Tesla stock, which is trading at a third of the price at which it closed on Wednesday.
That includes Musk, the world’s richest person with a net worth of about $264 billion, according to Forbes. Musk still owns roughly 15% of Tesla’s common stock.
Companies with high share prices often split their shares to make the cost of a share more affordable for individual investors. The reason is that some investors might be more inclined to buy stocks if they are trading at a lower price.
Amazon ( AMZN ), Shopify ( SHOP ), Google owner Alphabet ( GOOGL ), and meme stock GameStop ( GME ) have made splits in recent months.