Tesla stock split 2020: what you need to know

Tesla five-for-one stock split 2020

The Tesla (TSLA) stock split was announced on 11 August 2020, and it is set to take place on 31 August 2020. It will be a five-for-one split, meaning that there will be five-times the number of shares in circulation post-split, and the share price will be reduced to one-fifth of its pre-split value.

Why is Tesla splitting its stock?

Tesla released a statement that the split wants to ‘make stock ownership more accessible to employees and investors’.¹ This comes on the back of a meteoric year for the company, which has added more than 500% to its share value over 12 months from August 2019 to August 2020.

For reference, at the time of writing (12 August 2020), the Tesla share price had reached over $1450 per share in pre-market trading. We’ve included a screengrab of the Tesla share price performance below, which charts the rise from 1 August 2019 to 12 August 2020.

Tesla stock split history

This is the first stock split that Tesla has ever carried out, so there is no company precedent to compare this split to. What we do know, is that many investors and traders have been eyeing a Tesla stock split for some time, especially given the share price’s continued rise throughout 2020, even during the coronavirus pandemic.

Tesla stock split example

The Tesla stock split is a five-for-one split, which will reduce the TSLA share price to one-fifth of its pre-split value. So, if the company is trading at $1500 per share the day before the split, its share price after the split will be $300.

But, while the share price will be reduced, more shares will be in circulation – five times the current number. This means that an investor that currently owns ten shares worth $1500 each pre-split will own 50 shares worth $300 each post-split.

Tesla’s split-adjusted share price

We won’t know the exact split-adjusted share price until after the split has taken place on 31 August. But as previously explained, if the company is trading at $1500 on the day of the split, it will open at $300 a share the day after the split.

How to trade or invest in Tesla shares

Trading and investing are two different ways to take a position on the Tesla share price. Investing means you’ll take direct ownership of TSLA stock and become a company shareholder; trading means you’ll be speculating on the share price rising or falling without owning the stock outright.

With IG Bank, you can trade the TSLA share price with financial derivatives like CFDs. These let you take a position without owning the stock outright, and you’ll be able to trade with leverage – granting you full market exposure for an initial deposit known as margin.

With CFDs, you can go long to speculate on the Tesla share price rising, as well as short to speculate on it falling. This could be useful after the company splits its stock, because there will likely be increased market volatility and price movements could be unpredictable for a time.

Create a trading account to speculate on Tesla

Will Tesla stock split again?

At this stage and because this is Tesla’s first stock split, it’s hard to know whether the company will split its stock again. What we do know, is that other large companies such as Apple (AAPL) and Alphabet (GOOGL) have carried out more than one stock split in their history, so perhaps Tesla will be no different in this respect.

The Tesla stock split scheduled for 31 August could be the first in a long line of stock splits for the car manufacturer, especially if its share price goes on to rise after the split has completed.

Footnotes

1 Financial Times, 2020.