Tesla is splitting its shares 3-for-1, giving investors an extra two shares for every share they owned on Aug. 17 after Wednesday’s close.

NEW YORK – Unlike its cars, Tesla shares are about to get cheaper.

Tesla is splitting its shares 3-for-1, so after Wednesday’s close, investors will receive two additional Tesla shares for every Tesla share they owned on Aug. 17. In theory, that should drop Tesla’s stock price by about two-thirds before trading begins Thursday.

Stock splits don’t make a company more valuable or profitable. Tesla joins stock market heavyweights Amazon and Google parent Alphabet in splitting up their high-priced shares this year. Even meme-stock darling GameStop has done a stock split.

Stock splits are used by companies when the stock price becomes too high for individual investors to purchase individual shares, or when a company wants more shares on the market to facilitate trading.

Employees who own shares in a company can also benefit when new investors push the price higher. The lower prices should also make it easier to sell the shares.

Tesla shares were trading for more than $1,000 when the company announced its intention to split the stock in March. That’s a bit steep for most small investors. Some brokers allow investors to buy fractions of a stock, but not all.

According to a BofA Global research report released in March, companies that split their shares tend to outperform the broader market in the three-, six-, and 12-month periods following a split announcement. Since 1980, the 12-month performance of companies that have split their stocks has more than doubled that of the S&P 500.

HOW HAS TESLA SHARE PERFORMED?

Tesla shares closed at $889.36 on Tuesday, down about 16% for the year. A price around $296 is still not cheap, but it could entice more investors to buy the stock.

Every Tesla investor is partially counting on Elon Musk, the company’s surging CEO who, according to Forbes, has managed to make Tesla the world’s most valuable automaker and himself the world’s richest man.

But the ride can get bumpy with Musk at the wheel. In April, Musk struck a deal to buy social media platform Twitter. Some Tesla investors sold their shares because they feared Musk would be distracted from Tesla’s leadership if the deal went through. Shares fell as low as $620 in late May.

Musk has since made a U-turn and wants out of the deal. The dispute goes to court in October. Tesla stock began to rally in July, buoyed by better-than-expected second-quarter earnings and a general bullish trend in the stock market.

HAVE OTHER NOTABLE COMPANIES SPLIT THEIR STOCKS?

Amazon and Alphabet, Google’s parent company, have each split their shares 20-to-1 in recent months. Both companies were caught up in a broad rally for big tech stocks after the initial shock of the pandemic, and their shares surged above $2,000.

Alphabet’s shares are up 2% since the stock split went into effect on July 18, but it’s still down about 20% for the year. Google had its slowest revenue growth two years from now in the second quarter, a sign that the tailwinds propelling big tech companies during the pandemic have shifted in a challenging new direction.

Amazon shares are up nearly 9% since the split went into effect on June 6, but so has Alphabet The company has faced challenges and its stock is down nearly 20% year-to-date. Consumers have changed their behavior and are spending more on services and less on goods. Like many companies, Amazon has seen its own costs increase significantly.

Even GameStop, the so-called meme stock that shot up ridiculously high last year before falling somewhat back to earth, decided to split its stock. Though in GameStop’s case, it was small investors who propelled the stock in the first place.

GameStop shares closed at $33.56 on Tuesday and are down about 6% since the split went into effect, partly reflecting the market’s decline over the past few days.

https://www.kvue.com/article/money/tesla-hopes-new-investors-go-for-the-ride-after-stock-split-ap/71-3f0407a1-4070-442f-a976-02ada00a8ca0 Tesla hopes new investors will follow suit after the stock split

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