Tesla, Inc.’s TSLA shares will begin trading on a split-adjusted basis on Aug. 25. Expectations are that the stock will trade up in the run-up to the split.
Incidentally, two other big techs - Amazon.com, Inc. AMZN and Alphabet, Inc. GOOGL GOOG recently split their shares. Does the post-split trading in these stocks have any read across for Tesla?
It could be a "yes" and "no." Tesla is not strictly a tech company, and its tryst with technology is primarily through the self-driving tech it is promoting for its electric vehicles and its usage of AI for the same.
However, Tesla is a fellow large-cap, just like Amazon and Alphabet. Another factor working in favor of all the three stocks is the sense of optimism that has returned to the market following the recent Main Street data point showing a let-up in inflationary pressure.
Amazon Since Split Announcement: E-commerce giant Amazon announced a 20-for-1 stock split on March 9. The board also approved a $10 billion stock buyback program.
Assuming $1,000 was invested in Amazon shares coinciding with the split announcement, an investor would have had 7.2 shares, based on the split-adjusted closing price of $139.28 on March 9. The same shares would be worth $1,033.56 now, a return of 3.5%.
If a person had invested $1,000 just before the stock split took effect, they would have pocketed a return of 17.3%.
Read Benzinga's story on Tesla stock's outlook following the stock split announcement
Alphabet Since Split Announcement: Alphabet also split its shares in the ratio of 20-for-1 this year, with the announcement regarding the corporate action coming on Feb. 1. The stock began to trade on a split-adjusted basis on July 18.
Someone who invested $1,000 in Class A shares of Alphabet around the announcement of the split would have received 7.3 shares. At Friday’s closing price, these shares would have fetched $884, a negative return of 11.6%. Incidentally, the market was in the doldrums until the first half of the year due to macroeconomic and geopolitical uncertainties.
Alternatively, if $1,000 were invested in the shares ahead of the stock split taking effect, it would have generated a return of 8.9%.
Telsa’s Split Could Be A Different Story: If the economic fundamentals don’t deteriorate and the market can sustain the recent upward momentum, there's a potential for Tesla to rally into Aug. 25 and maybe after.
Future Fund’s Gary Black said he sees Tesla stock reclaiming the $926 level at which it closed on Aug. 4, the day before Elon Musk resumed selling Tesla shares. Musk sold shares on Aug. 5, 8, and 9.
“No reason TSLA can’t reclaim $926 going into 3:1 split on 8/25, macro permitting,” Black said.
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