Tesla Announces 5 for 1 Stock Split
Tesla has announced a 5 for 1 stock split, causing TSLA's share price to rise by as much as 8% in after-hours trading shortly after the announcement.
Here is the announcement in full:
"Tesla announced today that the Board of Directors has approved and declared a five-for-one split of Tesla’s common stock in the form of a stock dividend to make stock ownership more accessible to employees and investors. Each stockholder of record on August 21, 2020 will receive a dividend of four additional shares of common stock for each then-held share, to be distributed after close of trading on August 28, 2020. Trading will begin on a stock split-adjusted basis on August 31, 2020."
After trading on Friday, August 28, four shares will be added for each outstanding TSLA share meaning the total share count will be five times higher than it is prior to the split. At the beginning of trading on August 31, TSLA's share price will reflect the new share count, meaning the share price of one share will be divided into five parts to account for the new shares. For example, someone holding one share worth a hypothetical $1,500 on August 28 would then own five shares priced at $300 per share, for an equivalent $1,500 total value after the split takes place.
Options contacts will be similarly split. For example, one contract for the rights to 100 shares with a $2,000 strike price will become five contracts, each with the rights to 100 shares, with $400 strike prices.
For more analysis on TSLA's stock split, please see the included video.
Disclosure: Rob Maurer is long TSLA stock and derivatives.