Tesla's 3-for-1 stock split plans to BTC sale: What must investors know

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 Tesla's 3-for-1 stock split plans to BTC sale: What must investors know
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Highlights:
  • Tesla Inc (NASDAQ: TSLA) sold 75 percent of its Bitcoin worth US$936 million.
  • The electric vehicle player said it is seeking investors’ approval for a proposed three-for-one stock split.
  • Tesla stock jumped 1.8 per cent to US$756 on Thursday pre-trading. 

Tesla Inc. (NASDAQ: TSLA) has announced that it will seek its investors’ approval for a three-for-one stock split in August. If approved, shareholders will receive two additional shares for one Tesla stock they hold on the day the stock splits. This would be the second time Tesla opted for a stock split in two years.

A stock split usually makes a stock more affordable. In 2020, the electric carmaker went for a five-for-one stock split, which resulted in a 60 per cent uptick in the share price from the day it was announced till the execution date.

While reporting its second-quarter earnings on Wednesday, Tesla said that it sold 75 per cent of its Bitcoin (BTC), worth US$936 million. Following this announcement, Bitcoin saw its price drop by 1.7 per cent to US$ 23,300. However, it rebounded after Tesla chief executive Elon Musk said that the company would reconsider boosting its Bitcoin exposure in the future. 

What could a stock split mean for Tesla investors?

In an SEC filing last month, Tesla said that the proposed stock split would rejig the price of its common stock in the market, and that it would give its employees greater flexibility to manage their equity. After a stock split, stockholders generally have a higher number of shares while their prices are marked down. 

Tesla’s SEC filing last month mentioned that stockholders owning its shares by the closing bell on June 6 would be eligible to vote on the stock split. 

Tesla 3-for-1 stock split plans to BTC sale: What must investors know

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CEO Elon Musk is said to currently own 23.5 per cent of Tesla shares, while Vanguard holds six per cent.

Since late 2021, Musk has reportedly been selling a major chunk of his Tesla holdings to shore up a stake in Twitter and subsequently engaging in the now-abandoned US$ 44 billion buyout deal of the social networking behemoth.

Bottom line

Tesla Inc.’s shares jumped 1.8% to US$756 as of 4:50 a.m. Thursday in New York, before the opening bell. The stock has plummeted 30 per cent YTD. The company reported a second-quarter profit of US$2.26 billion, down by 31 percent from the previous quarter at US$3.3 billion.  

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