With Tesla‘s (NASDAQ: TSLA) shares on the march north again, investors are starting to ask when the company might split its shares again. It might surprise you to learn that in spite of its incredible success, Tesla has only split its shares twice.
Let’s dive into the history of Tesla’s prior stock splits and look at the evidence why another split could be coming in 2024.
Tesla’s Stock Split History
As noted, Tesla doesn’t have a long history of stock splits. In fact, the company has splits its shares just twice!
|Price Day Before Split
|August 25, 2022
|August 31, 2020
It’s important to know what prices Tesla stock previously hit before its stock split. In August, 2020 the stock traded for more than $2,000 per share before it split!
At levels that expensive, there are important reasons to split shares. While most brokerages now offer fractional shares (to allow you to buy a half share of Tesla, for example), share prices that are too expensive can limit the amount of retail investors who can purchase a stock.
Another reason to split shares is that some major indexes (such as the Dow) are price-weighted, meaning they move by share prices rather than the actual market value of companies inside them.
If Tesla ever wanted to join the Dow Jones Industrial Average and enjoy the extra visibility cachet that comes with being a member, it would likely need to split its shares if they’re trading above $300 per share or so. It’s widely believed that a key motivation for Apple (NASDAQ: AAPL) to issue prior splits was to get its price down to a level it could become a Dow Jones component.
Tesla’s second share split in August, 2022 came at a much lower price its first split. Before the split Tesla was trading for a bit less than $900 per share and split its shares 3:1. After the stock split Tesla still traded for about $300 per share, which is higher than its share price in late 2023.
When Will Tesla Split its Stock Again?
We believe it’s likely Tesla will split its stock again if it crosses $400 per share, which is possible in 2024.
Let’s examine the reasons why Tesla would choose to issue another stock split once its shares surpass $400/share again.
- Decreasing Price Per Split: Tesla’s 2020 stock split occurred when it was trading at more than $2,200 per share and the company issued a second stock split when it was trading for less than $900 per share. As Tesla gets larger, it appears they’ll target lower prices for stock splits. In fact, Tesla first floated the idea of a second stock split in a proxy statement when its stock price had only returned 43.5% since the time of its first split. They key idea here: Tesla believes a lower share price gives it more flexibility in issuing equity and gathering more retail investor interest, so it will likely keep decreasing the price at which it issues stock splits.
- Stock Splits Have Been a Catalyst in the Past: Theoretically, stock splits don’t increase the value of a company. While the price is lower, there are more total shares. However, prior stock splits have led to significant attention around Tesla’s stock. In August 2020, Tesla’s shares gained 81% between the announcement of a stock split and when the split occurred. Obviously, that was a very bullish time in the market, but the fact remains that stock splits attract more attention.
- Another Stock Split Could Make Tesla a Dow Component: The Dow Jones Industrial Average has 30 of the most “blue chip” companies in America. In 2009, General Motors was removed from the Dow after an 83-year run, leaving the index with no automakers. With Tesla now solidly profitable and rapidly becoming an iconic American brand, it could be attractive to add another automaker to the index. However, as noted earlier, the Dow is a price-weighted index which means the stock price of stocks joining the Dow matters. As of later 2023, just a single Dow component trades for more than $500 a share. It’s likely the Dow would prefer Tesla trading for $100 to $200 per share versus higher prices above $400. That way Tesla doesn’t affect the performance of the index in an outsized way.
Given all these factors, you can see why it would be in Tesla’s interest to split its shares once again if its share price surpasses $400/share and perhaps even lower levels.
However, Tesla at $400 per share would also mean the company is worth about $1.25 trillion, which is more than companies like NVIDIA and Meta Platforms are worth in late 2023.
Still, it’s exciting to think about the idea that Tesla could once again split its shares. As for whether that happens in 2024, we’ll have to see how well the company executes on major events like the roll out of the Cybertruck and its continued development of Full Self-Driving technology.
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