Shares of Tesla shot up Monday after the electric vehicle giant disclosed plans to enable a stock split, which would be the second in two years.
said in an 8-K filing with the Securities and Exchange Commission that it will ask shareholders to approve an increase in the number of shares outstanding. The request will be made at its 2022 annual shareholders’ meeting expected in October.
The stock rallied 5.8% in premarket trading, putting them on track to open at the highest price seen during regular-session hours since Jan. 13. It slipped 0.3% on Friday to close at $1,010.64, snapping an eight-day winning streak. Monday’s rally comes even after a report that Tesla will pause production in China amid new COVID-19 lockdowns.
Tesla had 1.033 billion shares outstanding as of Jan. 31. In the 2021 proxy statement, the company said it is authorized to have 2.00 billion shares outstanding.
The company’s only other stock split, a 5-to-1 split, took effect on Aug. 31, 2020. At that time, the stock was trading at a pre-split-adjusted price of about $2,213. The stock closed Aug. 31 at split-adjusted $498.32.
To lower the stock price to around that level, Tesla would have to increase number of shares it is authorized to have outstanding by more than 1 billion, so it could enact a 2-for-1 split. To match the previous 5-for-1 split, the number of authorized shares outstanding would have to increase by more than 3 billion.
Although a stock split doesn’t change anything about a company’s fundamentals, it has historically helped boost the stock price, as it is viewed as a sign of management’s confidence that the stock will continue to perform well, as Mark Hulbert has written for MarketWatch.
Tesla’s stock had soared 78% from the time the company said after the Aug. 11 close that it approved a 5-for-1 stock split through Aug. 31, but then fell 33.7% over the next week. The stock didn’t close back above the Aug. 31 closing price until Nov. 19.
Tesla’s stock has lost 4.4% year-to-date through Friday, but has soared 63.4% over the past 12 months. In comparison, the S&P 500 index
has gained 14.3% over the past year.