According to reports, Tesla announced on Monday that it will apply to the shareholder’s meeting to increase its share capital in order to facilitate a stock split. It also makes it another large-cap company that has recently split its stock to attract more investors.
Tesla said in regulatory filings that the company will vote at its upcoming annual shareholder meeting to increase the number of authorized shares in order to effect a stock split. It would be the electric car maker’s second stock split since 2020 after several major U.S. companies announced plans in recent years.
Apple, Nvidia, and Tesla have all completed stock split in the past two years, and Amazon and Google parent Alphabet recently announced plans to split their shares. When a company splits its shares, it can lower the share price per share, thereby attracting more investors. But a stock split doesn’t affect a company’s fundamentals.
However, Bank of America Global Research said in a recent research report that stock splits “have historically been good” for companies, with the average return of related companies a year after a stock split of about 25%, compared with the overall market over the same period. The rate of return is 9%.
Tesla shares rose 8 percent on Monday, adding $100 billion to its market value. After Amazon announced on March 9 that it would split on June 6, its shares soared about 20% on the day, compared with a 7% gain on the Nasdaq over the same period.
At the same time, Wall Street also found that large-cap growth stocks have recently started a broad rebound after slumping earlier this year on rate hike expectations and the Russia-Ukraine conflict.
Tesla was the most actively traded stock among Fidelity Securities online trading clients on Monday, with roughly equal numbers of buy and sell orders, a sign that retail investors are cautious about the company.
Since Tesla became a member of the S&P 500 in December 2020, it has become one of the index’s most heavily weighted stocks, currently at about 2%. The stock has rallied about 300% since announcing its initial stock split in August 2020.
Analysts see other higher S&P 500 stocks including Chipotle Mexican Grill (up 0.1% at $1,558 on Monday) and Booking Holdings (nearly flat at $2,247 on Monday). Analysts expect these companies may also announce stock splits in the future.