Today brought the news that Tesla (NASDAQ:TSLA) is planning another stock split, and investors are rightly interested in buying TSLA stock after it occurs. While the split isn’t official yet, and no date has been announced, momentum surrounding the decision is strong. However, it is impossible to forget how much TSLA stock has risen since the company split the stock for the first time in 2020. The recent announcements raise the question of whether investors should buy Tesla stock after the split takes place. While the answer is an immediate yes, the electric vehicle (EV) leader’s decision warrants a closer examination.
Let’s take a look at what the Tesla stock split means for investors.
Should You Buy Tesla Stock?
Investors remember watching TSLA stock surge in 2020 after the company announced the 5-for-1 stock split for August of that year. From the split’s announcement to the trading day when it became official, TSLA stock surged 80%. Today, shares surged in pre-market trading and are up about 8% as of this writing.
All major indicators point to history repeating itself. For investors who missed TSLA stock the first time around, that means a key opportunity to load up on shares when prices are low.
Companies implement stock splits to make their shares more accessible to small scale investors through price dilution. It worked very well for Tesla in 2020. Since the split was implemented, shares have more than doubled in value. And while a stock split dilutes individual share prices, it doesn’t affect a company’s overall value. This means that once the Tesla stock split is approved, the company is likely to see the bull run that it wants.
The Road Ahead
While the buzz surrounding Tesla stock is high today, there are other factors to consider. The company has submitted an 8K filing with the U.S. Securities and Exchange Commission (SEC) to split its stock, but it is contingent upon shareholder approval. There is no official date for the stockholder meeting, but there are rumors it could be held in June. Regardless, investors can assume that the motion will be voted on sometime within the next few months. The 8K filing noted that Tesla’s definitive proxy statement would include all necessary information about the meeting.
There’s no reason to suspect that the stock split won’t be approved, though. As noted, the first stock split saw an unquestionable boost to share prices. While it will mean current investors will see their shares diluted, they will also receive a stock dividend in the form of additional shares.
While it’s clear that investors will benefit from the Tesla stock split, that still leaves those considering buying in. For those wondering if they should buy Tesla stock, consider its performance since August 2020. Since the split became official, TSLA stock has risen by over 160%. Investors who bought in the days that followed certainly don’t regret it.
The Bottom Line
When a major company enacts a stock split, it’s generally good news for investors. We saw this when Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) announced a split earlier this year and again when Amazon (NASDAQ:AMZN) did the same. In both cases, shares responded well to the splits.
Tesla has been pegged as a company that would benefit from a stock split for months. Now that the company is moving forward with it, shares are surging. We’re still not sure when the Tesla stock split will happen, but investors should be watching keenly in the meantime. Investors who buy TSLA stock afterward will surely not regret it.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
