Tesla Shares Surge on 5-For-1 Stock Split Plan Ahead of S&P 500 Entry Hopes

Tesla's five-for-one stock split will makes its shares nominally cheaper on August 31, but sill far more expensive, in terms of earnings, than U.S. rivals Ford and GM.
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Tesla Inc. TSLA shares surged higher Wednesday after the clean-energy carmaker said it would offer a five-for-one stock split that would make its equity more accessible to investors as it prepares to enter the S&P 500 benchmark.

Tesla, which at nearly $1,500 per share is one of the most expensive stocks on Wall Street, will pay a four share dividend to each of its stockholders of record on August 21. The payment, which will come on August 28, will be reflected in Tesla's open market share price on August 31. 

It could also entice the tens of thousands of customers of Robinhood, the online trading app, to add shares at a cheaper price, even though the dilution will have no effect on the value of Tesla's earnings compared to its day-to-day trading level. 

The split follows similar plans from Apple Inc.  (AAPL) - Get Report, unveiled late last month, and comes ahead of what many analysts expect will be Tesla's inclusion in the S&P 500 later this fall. Tesla became eligible for the benchmark after it posted its fourth consecutive quarterly profit last month.

Tesla shares were marked 12.4% higher Wednesday to change hands at $1,545.00 each, a move that would extend the stock's year-to-date gain to around 263% and value the Palo Alto, California-based carmaker at around $287 billion.

Tesla, which assumed the mantle of the world's most-valuable carmaker last month despite its modest -- less than 1% -- contribution to total global sales, will sell, at most, 500,00 cars this year. Ford Motor Co.  (F) - Get Report, which has a market value that is ten times less, will likely shift 2.2 million vehicles and Toyota Motor Co.  (TM) - Get Report, with a market value of $205 billion, will sell 10.7 million.

Credit Suisse analysts suggest the S&P 500 inclusion could trigger even more activity in Tesla stock, with 'significant' incremental buying of around 18 million shares -- some 10% of its outstanding total -- from passive investors and fund managers that track the benchmark index.

The bank noted, however, that S&P Dow Jones committee members might struggle to accommodate Tesla's bulk: with a market cap approaching $300 billion, adding it to the index presents a challenge not seen since Facebook Inc.  (FB) - Get Report was squeezed onto the index in 2013 with a market cap of $120 billion. 

The committee is set to re-balance the index on September 21, but normally updates investors on new entrants a week four trading prior to the re-set. 

Should Tesla gain entry into the S&P 500, its market value would sit just below that of Procter & Gamble  (PG) - Get Report and Mastercard  (MA) - Get Report, placing it just outside the benchmark's top ten, comprising around 1.15% of the benchmark's $25.24 trillion total market capitalization.