The electric-car maker decided to make the move for several reasons, according to a document filed with the Securities and Exchange Commission. One is a desire for more flexibility in managing equity for employees who hold shares in the company. That should maximize shareholder value, according to the company.
“Unlike other manufacturers, we offer every employee the opportunity to earn equity. We believe that a stock split would help restore the market price of our common stock so that our employees will have greater flexibility in managing their equity, all of which we believe can help maximize shareholder value.”
Tesla last split its stock in August 2020. Since then, its shares have risen 43.5%.
Tesla does not have a sufficient number of authorized shares available
However, Tesla does not currently have a sufficient number of authorized shares needed to execute the split. It must do so by taking a vote and getting majority approval from current shareholders to increase the number of current shares.
“The current number of authorized shares of our common stock is 2,000,000 shares, which is insufficient to affect the stock split. The Authorized Share Amendment provides for an increase in the number of authorized shares of Tesla common stock from 2,000,000 shares to 6,000,000 shares.”
The stock split does not change the underlying value of the Company. The only thing that happens, in this case, is that the current shareholders get 3 new shares for every one share they hold, for the total value of the original shares. Usually, however, the stock goes up in price immediately after the split because it is suddenly more affordable to more monetary retail investors.