Tesla submits three-for-one stock split proposal in SEC filing

The move will help reset the market price of Tesla’s common stock so that all employees have access to it, company says

Tesla announced a similar five-for-one stock split in August 2020. Reuters
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Tesla submitted a proposal for a three-for-one stock split to the US Securities and Exchange Commission as it seeks to make its stock more accessible to retail shareholders.

The request is included in a list of provisions Tesla plans to bring up at its August 4, 2022 shareholder meeting, the electric vehicle maker said in its annual proxy statement to the SEC on Friday.

“Our success depends on attracting and retaining excellent talent by offering outstanding benefits and highly competitive compensation packages. We offer every employee an option to receive equity,” Tesla said.

“Since our stock split in August 2020 to June 6, 2022, our stock price has risen 43.5 per cent. While this value appreciation has led to our employees benefiting enormously through the years, we want to make sure all employees, no matter when they join, have access to the same advantages.”

The stock split would help reset the market price of Tesla’s common stock so that its employees will have more flexibility in managing their equity, the filing said.

In March, Tesla said it would ask its shareholders at the 2022 annual meeting to vote on another stock split, following one two years ago.

A stock split is when a company issues new shares and distributes them to existing shareholders.

“A 4-for-1 stock split, for instance, would mean that current investors with one share receive three additional shares so that following the share split, they now own four shares,” said Chris Davies, a chartered financial planner at The Fry Group.

All a stock split does is change the number of outstanding shares of a company’s stock without altering the shareholders’ ownership percentage in the company.

Shares surged significantly when Tesla announced a five-for-one split in August 2020. Technology companies Alphabet and Amazon announced splits this year to reduce the price of their shares.

It is widely believed that companies perform stock splits to democratise ownership of their shares. Stocks that have had a wild run-up in prices tend to squeeze out retail investors who may not be able to afford it.

By undertaking a stock split, companies try to make their shares more attractive and accessible to retail investors.

“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,” Tesla said in the SEC filing.

In the proxy filing, the Texas-based electric vehicle and renewable energy business revealed that board member Larry Ellison, who is also the co-founder of Oracle, does not plan to stand for re-election. He currently owns 1.5 per cent of Tesla shares.

The filing also showed that Tesla's billionaire chief executive Elon Musk currently holds 23.5 per cent of the company’s shares, Vanguard holds 6 per cent and Blackrock accounts for 5.1 per cent of shares.

Mr Musk, who recently struck a deal to acquire Twitter for $44 billion, has sold about $8.5bn worth of Tesla shares in an apparent move to begin funding his buyout of the microblogging platform.

In 13 different proposals suggested by shareholders, Tesla is being asked to examine and disclose more about its anti-harassment and discrimination efforts, board diversity, lobbying practices, supply chains and labour, and details about its own water use and water-related climate impacts and risks.

Tesla's giga factory in Austin- in pictures

Tesla had a strong start to the year, passing the $3bn mark in quarterly net profit for the first time in the January to March period.

The world's most valuable car maker reported that first-quarter net profit rose more than seven times year-on-year to more than $3.3bn, about $2.8bn more than the income earnedduring the same period in 2021.

Revenue during the period jumped 81 per cent to more than $18.7bn, exceeding analysts’ expectation of $17.8bn.

Updated: June 11, 2022, 7:11 AM