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Elon Musk splits Tesla stock after share price surge

·2-min read
Tesla chief executive Elon Musk - BRENDAN SMIALOWSKI  /AFP  
Tesla chief executive Elon Musk - BRENDAN SMIALOWSKI /AFP

Elon Musk's Tesla is set to make its shares more affordable to backers after announcing a five-way stock split, the first in its history, on the back of a record year of growth for the electric car maker. 

The company said on Tuesday that the share split would be made as a dividend distribution that would give four additional shares of “common stock” to stockholders recorded as of August 21. The stock split will come into effect on August 28. 

Stock splits are usually made by companies as a means of incentivising smaller, retail investors to trade in its shares. Tesla’s stated goal is to “make stock ownership more accessible” to employees and investors. 

Tesla shares jumped almost 9pc in New York on Wednesday to a new record high of $1,494 valuing the company at $278bn (£232bn). The stock has soared more than 200pc since the start of the year. 

The rally has made Mr Musk among the world’s top five richest people with a net worth of about $70bn. 

The rapid run-up in Tesla's stock has been propelled by a widening belief that the company has fixed its past manufacturing problems. It is also seen as moving to widen the appeal of its vehicles beyond the luxury niche with a series of new models.

Tesla's long road to profit
Tesla's long road to profit

Investors have also been boosted by the company’s recent financial performance, after it posted a $104m profit in its second quarter, its fourth consecutive quarter of profit, despite lockdown measures shutting down its California factory for a number of weeks.

Tesla’s rocketing growth has come despite other automotive giants in the industry such as Ford and General Motors facing declines as a result of the coronavirus pandemic. 

It has put Tesla on the brink of entry to the S&P 500 index in the US, a move that would be seen as a landmark moment for the 17-year-old company. 

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