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