4 things to know about Tesla’s stock split

Tesla’s stock has been on a roller coaster this year. Back on the first trading day of 2020 (January 2), the stock opened at $424 a share. By March 18, it had fallen to $350. But by July 20, it hit an all-time high of $1,650 a share. As of the time of this writing, Tesla is at a respectable $1,461—up over 6% in premarket trading for the day.

But what’s with that 6% premarket jump? It’s mainly due to the fact that Tesla has announced it is splitting its stock. Here’s what you need to know about the TSLA stock split:

1. Telsa will be splitting its stock at a 5-to-1 ratio. This means that, upon the date of the split, for every one previous Tesla share, there will now be five.
2. TSLA stock will split 5-to-1 on August 31. That so happens to be the day another major tech player, Apple, is splitting its stock.
3. Tesla’s stock split won’t necessarily make the company more valuable. On August 31, there will be five times the number of TSLA shares, but each share will be worth five times less than it was the day before. Investors, in other words, will not see the value of their total shares decline or get a boost in any way (of course, normal price fluctuations on August 31 apply).
4. What’s the point of Tesla’s stock split? Like all stock splits, it’s mainly a psychological thing. It makes the stock look cheaper for retail investors, which could drive at-home investors to pick up some shares. Tesla even stated the split is “to make stock ownership more accessible to employees and investors.” However, as mentioned above, the stock split has no effect on the fundamentals of the company.

So should you buy Tesla share now or wait until the stock split? That’s up to you and your level of risk, and if you think the stock will be more valuable or cheaper than it will be after August 31. It’s important to note, however, that some analysts feel Tesla’s stock is significantly overvalued at the moment. In a roundup of analysts on July 16, Barron’s found that most think the stock is currently trading way above what the actual value should be.