Announcing its stock split, Tesla said that they were looking to make its shares more accessible to employees and small investors. 

On Tuesday, August 11, automobile tech giant and electric car maker Tesla Inc announced its five-for-one stock split post market hours. By Tuesday market closing hours, TSLA (NASDAQ: TSLA) stock was down 3.1% slipping below $1400 levels.

However, soon after the split announcement, Tesla stock surged 5.57% in the post-market hours. Now in the pre-market, the stock is 6.81% up, trading at $1,468.00. As per the announcement, the split goes into effect later this month on August 31. While this split doesn’t change anything fundamentally about the stock, it will only make the stock affordable for smaller investors. Confirming this, Tesla in its press release said that they were looking to make its shares more accessible to employees and small investors.

Tesla (TSLA) has been the most favorite and most rewarding stock for Wall Street investors in 2020. At press time, TSLA stock is trading at over 200% premium year-to-date. Besides, the company’s outstanding performance in Q2 heled it to register the fourth consecutive quarter in profits.

This has also helped Tesla to become the most valuable car company in the world toppling giants like Toyota Motor Corporation (NYSE: TM). However, institutional investors avoided the Tesla stock for the last few years due to a lack of consistent profitability. But it has rather turned out to be the darling of the retail and individual investors.

Tesla Stock to Enter S&P 500

By delivering four consecutive quarters of profit, Tesla has managed to get through the minimum requirement of entering the S&P 500 index. Currently, the TSLA stock is only listed on the Nasdaq platform. However, entry to the S&P 500 will give the stock much more legitimacy and exposure to more investors.

Besides, analysts are saying that the current decision of stock split won’t affect Tesla’s entry to the S&P 500. Moreover, the stock split will also not make the TSLA stock less expensive. At present, the TSLA stock is currently trading 112 times its expected earnings over the next 12 months.

At present, Tesla’s valuations stand at $256 billion which is three times the combined market cap of rivals like Fiat Chrysler Automobiles N.V. (NYSE: FCAU), Ford Motor Company (NYSE: F), and  General Motors Company (NYSE: GM). The massive bull-run in the TSLA stock comes as the market believes that Tesla has come past its manufacturing problems. This belief comes as Tesla managed to deliver more than expected deliveries over the last few quarters. Besides, Tesla’s massive expansion of its manufacturing facilities is also another factor that’s making investors confident.

It will be interesting to see how Tesla traverses through the times ahead.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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