Tesla (TSLA) shares drop after announcing 3-for-1 stock split

3 min read | June 13, 2022 11:11 AM PDT | By Mridul Gogoi

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Tesla (TSLA) shares drop after announcing 3-for-1 stock split — Image source: © Jackbluee | Megapixl.com

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Highlights:

Tesla (Nasdaq:TSLA) announced a 3-for-1 stock split on Friday.

Shares of the electric vehicle maker dropped 3% in premarket on Monday.

Tesla’s Shanghai factory operating in full-throttle after Covid-induced shutdown.

Tesla Inc (Nasdaq:TSLA) stock tumbled around 3% in premarket on Monday after announcing a 3-for-1 stock split to boost its share numbers by three times to six billion.

The EV maker is toeing the same line as other major tech companies have done recently. But US stocks have been struggling to gain traction amid a broader market decline this year.

The selloffs intensified on Friday after the Labor Department released its May CPI data, which showed US inflation surged 8.6% annually.

As announced on Friday, Tesla would put the proposal to vote on August 4. The company also said in a regulatory filing that the stock split would help draw and retain talent.

However, it was a surprise because days ago, CEO Elon Musk had thrown the gauntlet to Tesla's 100,000 plus employees by announcing a 10% job cut to combat a likely recession.

According to the filing, the stock split aims to provide employees with an opportunity to buy and hold more stocks in the company. A stock split lowers the price of individual shares, making them more easily affordable to investors. It attracts more retail investors.

"Our success depends on attracting and retaining excellent talent, not only through providing a respectful, safe, inclusive and equitable workplace," the filing mentioned.

Also Read: BYD executive says it will supply batteries to Tesla 'very soon'

Tesla (TSLA) shares drop after announcing 3-for-1 stock split © Sheila2002 | Megapixl.com

Also Read: Elon Musk says no-deal before Twitter proves fake account numbers

Tesla stock trading low on Monday

Despite Friday’s stock split announcement, Tesla shares fell on Monday in line with the decline in other tech stocks as fears of a looming recession gain momentum. The TSLA stock was priced at US$664.24 at 11:37 am ET, down 4.66% from its previous close.

Meanwhile, Cathie Wood of Ark Investment Management LLC has bought more than 55,000 shares in Elon Musk’s company since May 23, reported Bloomberg. It came barely a year after she had sold her Tesla shares.

Bottom line:

While Tesla Inc. employees are given an option to buy equity in the company, this is not Tesla’s first stock split. In 2020, it went for a 5-for-1 stock split, which the company reveals had propelled its share price by 43% in the market.

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