Investing

After Tesla's Stock Split, Who's Next?

Paul Ausick

Published: August 12, 2020 11:58 am

After markets closed Tuesday, Tesla Inc. (NASDAQ: TSLA) announced a five-for-one split of the company’s common stock. Shareholders of record on August 21 will receive a dividend of four shares for each share they already own. The new shares will be distributed after markets close on August 28 and trading in split-adjusted shares begins on August 31.

Shares of the electric vehicle maker added about 8.3% in early trading Wednesday, to around $1,488 per share. Assuming a share price of $1,500 at the end of the month, the split-adjusted price on August 31 would be $300 per share.

Investors have jumped on the announcement to vacuum up more shares in anticipation of Tesla’s addition to the S&P 500 index. A larger number of shares, combined with demand for the stock from index funds, could drive the stock price even higher. The lower price per share also may attract investors who might have been spooked by a share price above $1,000.

On July 30, Apple Inc. (NASDAQ: AAPL) announced a four-for-one split, with split-adjusted shares also set to begin trading on August 31. Of 15 other stock splits announced in August, 13 are reverse splits, where one new share is issued for some number of already existing shares. A reverse split is often a signal of a company in serious financial trouble.

High-flying tech stocks are not among those troubled companies, however, and it’s not unreasonable to speculate on which of the tech giants could follow Apple and Tesla in splitting their shares.

Here are the five tech stocks with the largest market caps (not including Apple or Tesla), along with their stock-split history. Only one of this group has executed a stock split in the past five years, while one has not split its stock since the last century and another never has.

Microsoft Corp. (NASDAQ: MSFT) has a market cap of around $1.6 trillion and is the second most valuable U.S. company, trailing only Apple’s market cap of $1.9 trillion. Microsoft has split its stock nine times since its initial public offering in 1986, the first in 1987 and the most recent split in 2003. An investor who bought 100 shares of Microsoft stock at the IPO opening price of $25 per share would now own 28,800 shares worth about $5.9 million. Shares traded near $209 in the late morning Tuesday.

Amazon.com Inc. (NASDAQ: AMZN) has a market cap just under $1.6 trillion, making it the third-largest U.S. firm. Amazon stock has split three times since its 1997 IPO, all prior to 2000. A $10,000 investment in Amazon’s IPO at $18 a share would be worth more than $12 million now. The stock traded at around $3,150 a share Tuesday.

Alphabet Inc. (NASDAQ: GOOGL) has a market cap of just over $1 trillion and is the fourth largest company in the United States. Since its IPO in 2004, Alphabet (originally named Google) has executed just one two-for-one stock split. Trading at the IPO opened at $100 a share, and a $10,000 investment would now be worth well over $250,000. Alphabet shares traded at around $1,500 Tuesday morning.

Facebook Inc. (NASDAQ: FB) is the country’s fifth-largest company, with a market cap of around $765 billion. The IPO priced at $38 a share in May of 2012, and an investment of $1,000 would have bought 26 shares, each of which is worth around $260 currently, for a total of $6,760. Facebook has never split its stock.

Netflix Inc. (NASDAQ: NFLX) is the 21st largest company in the United States, with a market cap of around $220 billion. Since its 2002 IPO at $15 a share, Netflix stock has split twice, most recently at seven-for-one in July 2015. A $1,000 investment in Netflix stock at the IPO price would be worth more than $400,000 today. The stock was trading around $480 a share Tuesday morning.

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