5 to 1 Stock Split And What That Means For Investors In 2020
Stock buying is a risky game filled with its ups and downs. No one can predict what will go on in the stock market, but we can speculate. One stock that is taking the stock market by surprise day by day is Tesla, and people keep wondering how good the future looks for the company. Welcome to my blog, the home of everything stock investment, financial management, minimalism lifestyle, and financial freedom. For those who are yet to subscribe, I cannot begin to tell you how much you have missed out.
If you are a beginner to stock investment and would like to learn more about it, check out my post ‘Beginners guide to stock investment in 2020’. Your support and encouragement keep me going, so don’t forget to leave a comment and like it. Let’s get to the main topic. Today we will be discussing Tesla’s Five to one stock split and what that means for investors in 2020.
If you are conversant with me, then you know that I have a fondness for Tesla. It is a company that has such an excellent future ahead of it. You can check out my post ‘How Tesla has made its investors millionaires’ to see my view on the stock. So what is the latest surprising thing Tesla has done? It’s the tesla 5 to 1 stock split.
What is the Tesla five to one stock split?
On the 11th of August, Tesla announced that it would be offering a five for one stock split. The split is to take effect from the 31st of August. This new announcement from the Tesla Company will be offering its investors five stocks for each one. According to their release, this is to invest in an easier option for their employees. However, this does not imply that if you are an existing stockholder, you will become five times richer overnight. What Tesla means by this is; you will get five times your stock percentage, but each stock value will be divided by five.
Let’s do a bit of calculation to understand fully what Tesla is about to offer. Tesla stock as of the 12th of August was around $1554.76. Let’s make things easy and say the Tesla stock is at $1,500. Now let’s imagine you have only a single stock, worth $1,500; by the time of the split, you will have five stocks instead, but rather than each share being at the value of $1,500 each, your stock will be valued at $300 per share.
Simple nothing really will change in terms of stock value, but now, the number of available trading common stocks for Tesla will be multiplied by five.
What is going to happen from the 28th of august?
On the day the split happens, each investor will have their stock split up five times. The dividend payout for each additional stock will be initiated on that day but paid on the 28th of august. The company will instantly begin trading at a stock split basis from the 31st of August. The Tesla stock has already seen a 13% increase as of the 12th of August, which has been beneficial to its market cap. This new change is appealing to more people, and so their investor ratio is rising.
What will this do to investors?
Considering an average investor who just wants to get into the investment business, you can say that this change is a big plus. Understand this; the Tesla stock is a great one, but the value for one is high. Most average investors do not have the interest to spend over a thousand dollars on just one stock. But if the value is at $300, then it could be a plausible investment for the common investor. And if more people get to invest, the stock value is more likely to increase by the day.
As of the 12th of August, Tesla closed at $1,554. 76, which rose slightly before hours on 13th to $1,563.99. Their market cap is at $289 billion; their Beta is at 1.30, PE ratio at 804.74, and their earnings per share is 1.93. When you take a look at their one year chart, you see that they have done exceedingly well; even with the heat of the pandemic, they have remained strong.
According to a rating of 1 to 5 with 1 being a strong buy and 5 being a strong sell, a lot of analysis has rated Tesla as a three, which means it is a company to just hold on to for now. Tesla, this year alone, has gone up over 200%; this shows a lot of growth. Tesla’s massive growth happened from around June to July, where the company went from being sold at around $900 to over $1,500.
At some point in July, they reached their all-time highest at over $1,700, which has currently dropped. That particular all-time high was because of their 2nd quarter result, which was unbelievably good, even beating analysis expectations. This was a lot for a company that was hit by the pandemic. The company has seen its fourth straight quarter of successful financial reports, so they are qualified to enter the S&P 500 list.
The Tesla stock truly is an amazing one, and I foresee a bright future for it. The stock keeps doing well, and with this split, I believe a lot of smaller investors can key into it. Of course, the split does nothing for the big investors or even the company, but it just gives the stock the extra hype I don’t think it needs. If we are talking about a stock that has a lot of diversification and a future for success, then Tesla wins. I look forward to the future of the stock, and with Elon Musk on board, I can trust in the company even more.
Remember that these videos are not financial advice but just my opinion, so never be so stuck on what I say. Tell me your opinion of the stock and the future of Tesla in the comment section. If you found the video useful, then please leave a like and share it with friends. You should subscribe to obtain the latest on all our releases.