Tesla, just a few years back was a struggling startup on the brink of bankruptcy. However, now the EV maker is the most valuable automaker in the world and has a market valuation bigger than that of the next 10 largest carmakers combined.
This is a far cry from the Tesla of 2018. Back then, in the midst of the Model 3 ramp and the ensuing challenges, Musk was attempting to sell Tesla to Apple to save the former from bankruptcy.
At the time, Musk reached out to Apple CEO, Tim cook to discuss the possibility of the tech giant acquiring Tesla for $60 billion. That’s one eighteenth its current valuation of $1 trillion. And Apple with over $200 billion sitting in the bank could have easily bought Tesla.
However, lucky for Tesla investors and Elon Musk, Tim Apple refused to even take Elon Musk’s call. And now, in mere 4 years, the discussion has shifted to when Tesla will overtake Apple as the most valuable publicly-traded company in the world.
During the darkest days of the Model 3 program, I reached out to Tim Cook to discuss the possibility of Apple acquiring Tesla (for 1/10 of our current value). He refused to take the meeting.— Elon Musk (@elonmusk) December 22, 2020
This is an incredible performance on Tesla’s part. However, as the EV maker’s shares have kept surging, Tesla’s stock has currently grown to over $1000 per share. This has made purchasing a single Tesla share unachievable for small retail investors.
To mitigate this trend, back in 2020 when Tesla’s stock price ballooned to over $2,200 per share the EV maker instituted a 5 to 1 stock split. This brought Tesla shares to below $500. However, since the stock split, Tesla shares have grown by 100% and at the start of this month, the EV maker announced it will be doing another stock split.
The stock split is currently scheduled to be voted by Tesla investors at the EV maker’s upcoming shareholders' meeting which is expected to be held this coming October. Although the vote will ultimately be left to shareholders, Tesla management still did not specify what the ratio for the stock split should be.
Following the announcement, the stock split has been speculated to be anything between a 2 to 1 split all the way to a 69 to 1. However, now thanks to multiple JP Morgan customers who have bought their Tesla shares through the broker, we finally have an answer.
Late last night, JP Morgan customers with Tesla shares in their account started to receive a “notification of a corporate action for a security held in [their] J.P Morgan account”. The letter read…
"We have received notice that the security listed below, [Tesla] which you currently hold in your J.P Morgan account, will undergo a corporate action. We are providing you with the terms of the corporate action for your reference.
Please note that we are providing this notification to you for informational purposes only. Any proceeds and or shares you may receive as a result of the corporate action will be credited to your account upon receipt."
And finally in the section titled “Terms of corporate action”, JP Morgan writes it has “preliminary information [of a] a twenty for one stock split.”
This is the first time we have had information regarding the scope of the stock split. And a 20 to 1 split should raise Tesla’s number of outstanding shares to around 20 billion and lower the stock price to around $50.
At this price, Tesla stock should be easier to purchase for most retail investors. However, with the introduction of fractional shares where investors could buy a fraction of a company’s stock, it’s not exactly clear how many new retail investors Tesla will be able to attract with the latest move.
Nevertheless, stock splits usually signal expected growth by management so we will still expect Tesla's stock price to be positively affected by this news.
As of now, the 20 to 1 split is only preliminary information by a single broker, however, we will be sure to keep you posted as we get further information. Until then, make sure to visit our site torquenews.com/Tesla regularly for the latest updates.
So what do you think? Excited Tesla might be doing a 20 to 1 stock split? How do you think this news will affect the EV maker’s shares? Let me know your thoughts in the comments below.
Image: Courtesy of Tesla
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Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.