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· Posted on
February 21, 2024

Tesla's announced another stock split

It just couldn't hack being out of headlines for two days, could it?!

What's the key learning?

  • Tesla shares are now above US$1,000 each, so the company's announced another stock split
  • Tesla's share price jumped by 8%, because investors feel the shares are more attainable, even though it's no different to purchasing fractional shares
  • Fractional shares are portions, or slices, of stocks that are smaller than a whole share.

Background: Back in August 2020 when Tesla's share price was US$2,200 per share, Elon announced a 5-for-1 stock split. Nek minnit, Tesla shares jumped 13%.

What happened: Now, he's back at it again. Tesla's shares are now above US$1,000 each, so Elon reckons it's time for another split. Surprise, surprise, Tesla's share price jumped back up by 8%.

What else: That's because stock splits make the shares feel more attainable to the everyday retail investor. But it ain't any different to purchasing fractional shares.

🔔 What's the key learning?

💡Fractional shares are portions, or slices, of stocks that are smaller than a whole share.

💡 Here's the thing: buying a 20% portion of a $1,000 Tesla share is the same as buying 1 Tesla share after a 5-for-1 stock split. But it just don't feel the same emotionally.

💡So, although it's fundamentally just a cosmetic accounting trick... it makes you feel like a bigger owner. The bonus? Stock splits also have a history of generating a short-term rally in a company's stock price.

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