Why Tesla Stock Will Be More Affordable Next Week

The Elon Musk-led mega-EV company Tesla Inc TSLA announced on Aug. 4 its intention to split its stock just two years after completing another stock split.

With the 3-1 split just a week away, here’s what you need to know about it.

What's Happening: Aug. 25 is when Tesla shares will begin to trade on a split-adjusted basis. A 3-1 stock split means that for every one share of Tesla stock owned, a shareholder will receive two additional shares — with the value of the three shares combined equal to the value of the previous one share.

Here’s What That Looks Like: At the current price of $908.43 a share, a shareholder would receive three shares, each worth $302.81 if the split were to occur right now. The three shares would cost the same $908.43 as the original one share.

Companies typically split their stock to lower the trading price to a range that investors would find comfortable and to boost the liquidity of trading in their shares.

Read more: What Non-Tesla Vehicle Is Being Used By Elon Musk's The Boring Company In Las Vegas?

The company said in its 2022 proxy statement that it wants to make sure its employees will have more flexibility in their equity: “We believe the stock split would help reset the market price of our common stock so that our employees will have more flexibility in managing their equity, all of which, in our view, may help maximize stockholder value.”

Tesla also nodded to the retail investor, saying, “As retail investors have expressed a high level of interest in investing in our stock, we believe the stock split will also make our common stock more accessible to our retail shareholders.”

Can I Buy Tesla Shares Now and Expect A Split? No, a current or new shareholder who wanted to receive the two extra shares needed to buy Tesla stock by Aug. 17, as that was the record date for current Tesla shareholders.

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What Happens If I Buy Tesla Shares Now? If you buy shares on or after the record date but before the ex-date or (ex-dividend date), you will purchase the shares at the pre-split price and will receive — or your brokerage account will be credited with — the shares purchased. Following the split, you will receive — or your brokerage account will be credited with — the additional shares resulting from the stock split. (Source: Apple Inc FAQ)

Tesla's last split, a 5-1 in 2020, triggered a bull-run in the stock that ran it 142% higher through the end of the year. While that may not happen again, investor interest in the EV maker remains high.

See Also: Tesla Soared Into 2020 Stock Split: Here's Why This Time May Be Different

Photo: Ralf Liebhold via Shutterstock