What Does a 3-for-1 Tesla Stock Split Mean for Investors?

  • Tesla (TSLA) has filed for a 3-for-1 stock split.
  • The company’s 2020 stock split resulted in significant gains.
  • However, this news doesn’t necessarily mean the results will be the same.
"TSLA stock" - What Does a 3-for-1 Tesla Stock Split Mean for Investors?

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Tesla (NASDAQ:TSLA) has taken the next step toward splitting its stock. The electric vehicle (EV) innovator has filed its yearly proxy statement with the Securities and Exchange Commission (SEC), revealing plans for a 3-for-1 stock split. The company announced plans for the split in April 2022, but even as the deal moves forward, TSLA stock is still down today. Some experts have speculated the second Tesla stock split may not yield the same positive results as the first.

What’s Happening with TSLA Stock

TSLA stock fell this morning in pre-market trading and has kept falling since. As of this writing, it is down more than 4% for the day and looks poised to keep falling further. Shares were falling late last week, and today isn’t looking any better.

Tesla isn’t the only high-growth company whose share prices are dropping today, nor is it the only EV stock down. But previously, news of the TSLA stock split has helped elevated shares, even if it is only speculative. Today’s performance warrants a closer look.

The Next Tesla Stock Split

Stock splits are already becoming a defining market trend for summer 2022. Amazon (NASDAQ:AMZN) has already enacted a 20-for-1 stock split and Shopify (NYSE:SHOP) is planning a 10-for-1 split for later in the month. While the Tesla stock split is still contingent on shareholder vote, it is expected to pass at the Aug. 4 meeting. Investors remember the success of Tesla’s 2020 stock split that sent shares up immediately.

But despite the success of its first stock split, Tesla has begun drawing some skepticism. Julia Horowitz of CNN Business recently speculated Tesla’s old trick might not prove effective at generating the type of momentum TSLA stock needs.

As Horowitz sees it, the negative macroeconomic headwinds that large-scale tech stocks are facing, such as continuous inflation and further rate hikes, have generated too much bearish energy. “In the current market environment, it’s hard to get anyone excited about Tesla or many of its fast-growing peers,” she notes.

Horowitz also raises some Tesla-specific concerns. Elon Musk has been feeling “super bad” about the economy and initially promised to lay off 10% of Tesla’s workforce. She worries investors won’t be excited about the possibility of owning TSLA stock on the cheap.

“At some point, Wall Street’s bargain hunters may enter the scene, putting a floor under stocks that have been hit hard by the recent selloff,” she states. “But this moment hasn’t arrived yet — even with stock splits on the table.”

The Road Ahead for TSLA Stock

While Horowitz’s concerns are well-founded, it is important to note one thing: The Tesla stock split is still months away, and Wall Street bargain hunters have plenty of time to come around on TSLA stock. For all the bearish energy that continues to surround markets, investors remember the high price points TSLA stock was trading at in 2021. It will be difficult for the more risk-minded investors to pass on that, particularly given the upcoming catalysts that some experts see for Tesla.

Even if markets continue to struggle, these stock splits are likely to keep investor interest high. Industry leaders such as Tesla and Amazon are not immune to market turbulence. But they are also quick to recover when negative trends shift.

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.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.

Article printed from InvestorPlace Media, https://investorplace.com/2022/06/what-does-a-3-for-1-tesla-stock-split-mean-for-investors-tsla/.

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