Tesla said it is planning a second stock split in roughly two years, giving a lift to shares that had been trading lower on news Covid-19 is again disrupting operations.
In an oddly worded tweet early on Monday, Tesla said it would seek shareholder approval to authorise additional stock to enable a split. In a follow-up regulatory filing, the company said increasing the number of its common shares will allow for a split by way of a dividend. The ratio of the split is one of the details that will be worked out later.
Tesla rose 4.9 per cent to $1,059.85 at 9.37am in New York, erasing earlier declines after chief executive Elon Musk announced he again has Covid-19. Bloomberg News also reported earlier that the company was extending the temporary shutdown of its car plant in Shanghai due to the surge in cases in the city.
Tesla’s board has accepted the management proposal, but authorising the dividend still requires final approval, the company said in its filing. Tesla said it will release a definitive proxy statement later with details including the date and location of the annual meeting.
Companies including Alphabet and Amazon have announced splits early this year to reduce the price of their shares, making it easier for retail investors to afford them. Tesla soared after the company announced a 5-for-1 split in August 2020. The shares were added to the S&P 500 index later that year.
Tesla is one of only eight companies in the benchmark US stock index with a four-digit share price, data compiled by Bloomberg shows. All have traded lower this year through last week’s close.
“We view Tesla’s move following the likes of Amazon, Google, Apple and initiating its second stock split in two years as a smart strategic move that will be a positive catalyst for shares going forward,” Daniel Ives, a Wedbush Securities analyst, wrote in a report. He rates Tesla’s shares the equivalent of a buy with a $1,400 target price.
Mr Musk, 50, has been in a years-long feud with the US Securities and Exchange Commission over the agency suing him and Tesla in 2018 after he tweeted about taking the company private. A judge signed off last week on the SEC’s plan to distribute the $40 million penalties collected from the billionaire and the company to shareholders who lost money during that episode.
The SEC also pushed back last week against Mr Musk’s efforts to cease oversight of his Twitter posts, saying it’s legitimate to investigate whether Tesla has institutional controls in place related to its disclosures and whether Mr Musk is complying with them. The agency has been looking into tweets Mr Musk sent in November about offloading some of his shares after his brother Kimbal sold about $109m worth of stock.