Tesla, Inc. TSLA is on the cusp of implementing one of the most-awaited corporate actions of 2022.
For the unversed, electric vehicle pioneer Tesla announced on Aug. 5 that it has secured board approval for splitting its common stock in the ratio 3:1. The split is to be implemented in the form of a stock dividend, with each shareholder of record as of Aug. 17 receiving two additional shares for every share they hold.
The dividends would be distributed after the close of trading on Wednesday, and the stock will begin trading on a split-adjusted basis on Thursday.
Here’s a look at three key things that could be of interest to investors:
1. What 2020 Split Reveals About Post-Split Trading? Tesla stock jumped 12.6% on Aug. 31, 2020, the day when the Elon Musk-led company’s shares began trading on a split-adjusted basis following a 5-for-1 split. If this could be considered a precedent, the stock could see a nice bump up in the near term.
Following the 2020 split and the initial surge, the stock pulled back steeply, but the weakness was due to a $5 billion secondary stock sale the company announced.
2.Tesla Stock Is Coming Off Marked Weakness: Tesla shares have come under selling pressure in 2022, dragged by macroeconomic uncertainty, and geopolitical tension-induced supply chain challenges. For the year-to-date, the stock is down close to 16%.
When the stock split took effect in 2020, Tesla shares were already up over 400% for the year-to-date period.
Does that mean we could see pent-up demand acting as a boost? This unfortunately depends primarily on factors extraneous to the company, such as inflation and the interest rate outlook. Market experts predict a revival in broader market sentiment heading into the final quarter of the year.
The expectation is for inflation to cool off, providing leeway for the Fed to drop its aggressive stance following the September meeting.
3. Tesla’s Staring At Catalyst-Rich Period Ahead: Musk has hinted at several events for the remainder of the year, although he circled in on the wider release of the full-self-driving software as the key focus.
Tesla is scheduled to host its second AI Day on Sept. 30. An investor who purchased Tesla shares during the first AI Day held on Aug. 19, 2021, would have generated a return of about 38%, even after accounting for the year-to-date losses for 2022.
Musk also revealed earlier this week a “show and tell” event for Neuralink, his neurotechnology company that develops implantable brain-machine interfaces, will be held on Oct. 31, coinciding with Halloween.
Aside from these, Tesla bull and Future Fund co-founder Gary Black sees S&P upgrading Tesla’s credit rating in August or September, which will likely boost institutional ownership. He also sees the lifting of the Twitter, Inc. TWTR buyout overhang as another catalyst. Tesla may also shed details on additional gigafactories, rumored to come up in the U.K. and eastern North America.
Tesla shares were trading higher by 1.51% to $902.77on Wednesday morning, according to Benzinga Pro data.
Photo: Created with an image from Steve Jurvetson on Flickr
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