In an 8-K filing for the Securities and Exchange Commission Tesla said that it will ask shareholders to approve an increase in the number of shares outstanding. The request will be made at the 2022 annual meeting of shareholders expected in October.
What about numbers?
The stock gained 5.8% in pre-market trading, opening at the highest price recorded during a regular trading session since Jan. 13. On Friday, it fell 0.3% to close at $1,010.64, snapping an eight-day green streak. Monday’s rally also comes after news that Tesla will suspend production in China due to the new COVID-19 lockout.
As of January 31, Tesla had 1.033 billion shares outstanding. In its 2021 proxy statement, the company said it is authorized to have 2.00 billion shares outstanding.
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The company’s only other stock split a 5:1 split became effective on August 31, 2020. At that time, the stock was trading at a pre-split price of approximately $2,213. The stock closed on August 31st at a post-split adjusted price of $498.32.
To reduce the stock price to approximately that level, Tesla would have to increase the number of shares it is authorized to have outstanding by more than 1 billion, so it could implement a 2-for-1 split. To match the previous 5-for-1 split it would have to increase the number of authorized shares outstanding by more than 3 billion.
Fundamentally it doesn’t change anything
Although stock splits don’t change the company’s fundamentals, they have helped boost the stock price in the past because they are seen as a sign of management’s confidence that the stock will continue to perform well.