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The EV giant Tesla has announced that it would seek the approval of its shareholders in its upcoming Annual Meeting for a 3-for-1 stock split.
A major reason for a company to split its stock is to make the stock more investor-friendly. When share prices are too high for average investors, they are unable to invest in them. A stock split would bring down the price by splitting the stock into different parts to make it more accessible to small investors, thereby improving its own shareholder base.
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One of the main reasons for the stock split by Tesla is its recent sell-off. The stock has been facing selling pressure for the past month or so with some relief in between. In research by the Bank of America, stocks that have split climbed 25% on average over the next 12 months. Major tech giants have also used this corporate action to improve their stock's appeal.
This is Tesla's second stock split in less than two years, the first being the 5-for-1 split in August 2020. After its split on 31st August 2020, the stock jumped 5.6% in a single month. If this proposed stock split is approved by shareholders, greater participation can be expected in the company's shares.
The stock of Tesla is performing poorly in 2022 as it closed 1.67% down after witnessing a full gap down opening on Friday. At a close of $696.69 per share on Friday, the share registered a decline of 41.9% in 2022.
Article by Aman Agarwal.
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