Elon Musk Needs This to Happen Before Tesla Can Split its Stock 3-for-1

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Tesla  (TSLA) – Get Tesla Inc. Report is planning to split its stock 3-for-1 according to a regulatory filing late on June 10, but something has to happen first.

The electrical vehicle maker made the move for a couple of reasons, according to the proxy filing with the Securities and Exchange Commission.

First, “we believe the Stock Split would help reset the market price of our common stock so that our employees will have more flexibility in managing their equity, all of which, in our view, may help maximize stockholder value,” the company said in the filing. “Unlike other manufacturers, we offer every employee the option of receiving equity,” it added.

In addition, “as retail investors have expressed a high level of interest in investing in our stock, we believe the stock split will also make our common stock more accessible to our retail shareholders,” the company wrote.

Tesla last split its stock in August of 2020. Its shares are up 43.5% since then.

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But before the board of directors can approve the stock split, the company has to get current shareholders to authorize an increase in the number of authorized shares available.

“The current number of authorized shares of our common stock is 2,000,000,000, which is insufficient to effectuate the stock split,” Tesla said in the filing.

According to the proxy statement, “The Authorized Shares Amendment provides for an increase in the number of authorized shares of Tesla’s common stock from 2,000,000,000 shares to 6,000,000,000 shares.”

Tesla said that “as of June 6, 2022, we have 1,036,390,569 shares of common stock outstanding.”

Stock splits do not change the underlying value of a company. They simply divide it up over more shares. Still, they are generally viewed as a positive move that suggests optimism on the part of management over a company’s future prospects. 

Tesla plans to hold its annual shareholder meeting on Thursday, Aug. 4, 2022 to allow shareholders to vote on the increase in authorized shares.