Tesla Workers Will Be Winners in the Stock Split. They Get a Break on the Price.

A Tesla charging station in Arlington, Va.


Andrew Caballero-Reynolds/AFP via Getty Images



Tesla

stock is up as another stock split approaches. It just isn’t up as much as last time the company sliced up its shares.

The slower rise might be a small disappointment to investors.



Tesla

(ticker: TSLA) employees shouldn’t care as much. It means more stock for them at a better price.

Tesla shares are up about 8% since the company declared a 3-for-1 stock split on Aug. 5. The


S&P 500

is up about 4% over the same span.

Seven trading days beyond the first Tesla stock split, back in August 2020, shares were up an incredible 46%. Tesla stock rose about 81% from the declaration to the split becoming effective.

The S&P 500 was roughly flat over the span Tesla stock gained that 81%.

This time, Tesla shares have a long way to go if that performance is to repeat. There are about nine trading sessions left before the split is effective.

Tesla stock was down 1.2%, at $916.58, in recent trading. The S&P was down 0.3%. The Dow Jones Industrial Average was up 0.3%.

Expecting a repeat of 2020 is probably too much. What’s more, the split was just declared following the company’s annual meeting of shareholders. But management has been talking about this 3-for-1 split since March.

Investors, and traders, like making a quick buck trading a stock into an event. But employees, if they are paying attention, shouldn’t be too upset with the slower rise. That’s because they can buy stock at a better price.

Tesla has an employee stock purchase plan, or ESPP, that lets workers purchase stock with up to 15% of their total compensation at 85% of the prevailing stock price, subject to limitations.

Tesla didn’t respond to a request for comment about the limitations or how many employees avail themselves of the opportunity.

Tesla will also match retirement contributions at, essentially, a 50% rate up to $3,000. So if an employee contributes $6,000 to their 401(k) plan, they get a bonus $3,000. That program started in 2022.

Why investors buy stocks that are splitting is a fair question. The value of total stock held doesn’t change, just the number and price of shares. But investors, and traders, believe stock splits are a signal from management that good times lie ahead. Companies don’t split a stock expecting it to fall. And a lower share price can make shares more attractive to retail buyers.

Write to Al Root at allen.root@dowjones.com

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