Tesla shares split, Musk is full
alphabet list just now
Author: Gundam
Tesla founder Elon Musk likes to send news through his personal social media, and now his company continues this “tradition”. The world’s most valuable auto brand announced its upcoming stock split via a brief tweet on March 28.
“Tesla will submit a shareholder vote at this year’s general meeting to approve the authorization to issue additional shares in order to conduct a stock split.”
The brief did not disclose details of the planned stock split, including the ratio and timing of the split.
In the past, Tesla’s annual shareholder meeting was often held in summer, but due to the impact of the epidemic in the past two years, the shareholder meeting was postponed to the fall. Last year, it was held on October 7. Tesla has yet to announce a date for this year’s shareholder meeting.
Subsequently, Tesla submitted relevant documents on the stock split to the SEC, saying that the company’s board of directors had “green light” the stock split plan, and the stock split would be carried out in the form of additional shares distributed to shareholders, but it still did not answer the above questions. “The document raises as many questions as it answers,” Bloomberg teased in the report.
Tesla’s stock split comes less than two years after the last. In August 2020, Tesla split its shares on a 1-for-5 basis. After the stock split, Tesla’s stock price has risen by about 300%.
Tesla’s stock price has risen more than 80% in the past year, reaching the $1,000 mark. This has significantly pushed up the threshold for small and medium investors to open positions. Some analysts believe Tesla’s stock split was well timed.
“Jointing or stock splitting is a common equity disposal method under the mature capital market and company law system,” Shen Meng, executive director of Chanson Capital, told Alphabet. If the stock price is too high, it will raise the trading threshold, which is not conducive to maintaining active trading levels and is not conducive to more investors buying and selling. Therefore, the company will choose to split shares to lower the stock price.
In theory, a stock split would not affect a company’s value because it is only a change in the equity structure, not a substantive change. For example, an investor previously held 1 Tesla stock at $1,000, and after a 5-for-1 split, it becomes 5 Tesla shares at $200, and the value of the stock held has not changed at all.
However, historically, the increase in investor scale and trading frequency after a company’s stock split has often led to a short-term rise in stock prices. For example, after Apple announced its stock split in July 2020, its stock price rose 30% in a month. After Tesla’s stock split in August of the same year, it soared more than 60% in less than a month, and rose as high as 743% during the year.
“Stock splits give people more opportunities to participate, and as a result, the stock price continues to rise due to ‘buying gas’,” Shen Meng said.
Tesla’s share price has not performed as well as before since the beginning of the year, and has been in a volatile downward trend. In mid-March, the share price once fell below $800. But after the stock split was announced, Tesla’s stock price jumped.
In the U.S. stock market trading on March 28, Tesla’s stock price fell slightly after the opening bell, but after the announcement of the stock split, Tesla’s stock price turned to a straight upward, and rose 8.03% to $1,091.94 at the close; the market value increased More than 80 billion US dollars, the increase even exceeds the total market value of Ford.
Just by releasing the stock split news, Tesla’s stock price rose sharply without changing the company’s fundamentals. Musk, who holds a lot of stock, is not surprisingly one of the biggest beneficiaries.
A
Currently, Musk owns about 23% of Tesla. The volatility of Tesla’s stock price is directly related to Musk’s wealth level.
In August 2020, Tesla conducted its first stock split, and the stock price rose 12.57% on the first trading day after the split, with a market value of over $450 billion.
The soaring stock price boosted Musk’s net worth to soar by $11.7 billion in a single day to $115.4 billion, squeezing Zuckerberg to become the world’s third-richest person. At the beginning of the year, his personal fortune was less than $30 billion.
Unlike Cook, who only holds less than 1% of Apple’s shares, and his salary is mainly derived from basic salary and equity incentives, Musk’s personal net worth is completely linked to Tesla’s stock price, and his CEO position does not have any salary and bonuses. The returns all come from its Tesla stock holdings.
This result comes from a 10-year compensation plan that Tesla customized for Musk in 2018. This plan is a bit like a betting agreement. Musk’s apparent salary is zero. He can only get corresponding stock incentives after leading Tesla to one ambitious goal after another. Otherwise, he will get nothing.
Musk
But thanks to Tesla’s stellar performance in the past few years — Tesla’s stock price has risen by an astonishing 1876% in the past five years, Musk has achieved one of the ultimate goals of the compensation plan seven years ahead of schedule in 2021 (market cap hits $650 billion). As a result, he may be the person who has received the most equity incentives in a short period of time in the history of capital, and is actually the CEO who has received the most compensation.
After Tesla announced it would split for the second time, it was almost inevitable that its stock price would rise.
The rise is attributed to the emotional effect of the influx of retail investors. Tesla was the most bought stock among financial services firm Fidelity’s clients yesterday after the stock split was announced.
Analysts on Wall Street expressed concern about the irrational rise. Bloomberg quoted Morgan Stanley analysts as saying in the report, “We cannot fundamentally explain how the stock split immediately increased Tesla’s market value by nearly 1.5 times that of General Motors, or the value of an entire Volkswagen. market value.”
Shen Meng also told the Alphabet that whether Tesla’s share price will rise after the stock split should depend on the trend of the global new energy vehicle market and the performance of the U.S. stock market, and it has nothing to do with whether the stock is split or not.
Some analysts even directly called Musk a “guru of market psychology” to illustrate the effect of Tesla’s stock split on the stock price.
In its brief commentary on Tesla’s stock split, Tiger Securities said that in two recent Tesla votes (Tesla asked shareholders to vote on whether to split the stock, and Musk asked netizens to vote whether he sold the stock), “ Musk is pinching people’s hearts to death.”
However, since Tesla has not yet determined the date of the shareholders’ meeting, and the actual implementation time of its stock split has not been determined, Tiger Securities told the Alphabet that considering the time before Tesla’s actual stock split will be longer, this time Tesla’s stock price will be more volatile.
Tesla’s announcement of a stock split also tempered some of the company’s recent negative headlines.
This week, Tesla’s Shanghai plant was shut down for 4 days due to the epidemic. This is not good news for Tesla, which has been trapped in insufficient production capacity and long delivery dates. At present, Tesla’s domestic orders generally need to wait for 3 days. to 6 months. Previously, Tesla also stopped work for two days in the middle of this month due to the epidemic. Tesla responded externally that Tesla strictly implements various epidemic prevention and control requirements and arranges work at any time in accordance with the government’s epidemic prevention policies.
Some time ago, the SEC (US Securities and Exchange Commission) required Musk to comply with the settlement agreement reached with him in 2018, and Tesla lawyers must review some of Musk’s tweets beforehand. Musk said he was forced to sign a settlement and appealed to the court.
Musk’s physical condition also has a small problem. Last week, he said that he appeared to be infected with the new crown pneumonia, but he had almost no symptoms. Previously, Musk had been diagnosed with the new crown after visiting Sweden in November 2020.
B
Stock splits seem to have become the current trend for U.S. tech companies.
In February of this year, Alphabet, the parent company of Google, which has not conducted a stock split for 8 years, announced a 1-for-20 stock split plan. The stock split is expected to be completed on July 15 this year. 19 new shares will be acquired. At the time, Google shares were trading at about $2,753.
Less than a month later, Amazon also announced a 1-for-20 stock split, the company’s first stock split since 1999. The stock split is scheduled to be completed on June 6 this year. It also announced a share repurchase program of up to $10 billion at the same time.
In addition to Apple’s fifth stock split in 2020 and Tesla, which recently announced its second stock split, among the five trillion-dollar companies in the US stock market, only Microsoft has not conducted a stock split in recent years. Microsoft has carried out 9 stock splits in history, and its stock price is currently around $315, and the possibility of a recent stock split is unlikely.
The last time there was a stock split in U.S. stocks dates back to the 1990s. At that time, among the companies in the S&P 500, the number of stock splits exceeded 100 each year, and this scale has never been reached since the new century. In 2019, only two companies in the S&P 500 had stock splits.
“The stock split in the late 1990s was an overall rise driven by the Internet bubble. With the bursting of the Internet bubble, the stock price fell sharply, and the premise for a stock split is no longer available,” Shen Meng explained to Alphabet.
However, after the outbreak of the epidemic, the US capital market ushered in a strong rebound due to the ultra-loose monetary policy, and the stock prices of technology companies also hit record highs, making stock splits popular again. In 2020, seven S&P 500 companies announced stock splits.
However, there are also people who are firmly opposed to the stock split. Buffett’s Berkshire Hathaway, which has never split its Class A shares, trades as high as $530,000 a share. Buffett uses high stock prices as one of his criteria for selecting investors, which he believes will attract investment-oriented shareholders with a long-term perspective, rather than investors looking for short-term gains.
There are not many companies with stock splits in the history of Chinese concept stocks, and most of them are concentrated in the period when they returned to Hong Kong for listing in recent years. For example, Alibaba announced a 1-for-8 stock split plan before returning to Hong Kong in 2019, and Baidu announced a 1-for-80 stock split plan before returning to Hong Kong last year. Most of these stock splits take into account the exchange rate between US stocks and Hong Kong stocks. , as well as lowering the investment threshold for Hong Kong stock investors.
Ctrip may be the company with the most stock splits among Chinese stocks. It has conducted four stock splits in history. The most recent stock split occurred in 2015, when Ctrip had just acquired Qunar.
Amazon and Google both saw their stock prices rise after the news of their stock splits. Among them, Amazon’s stock price rose by 10.2% after the announcement of the stock split. So far, its stock price has risen by more than 20%, recovering the decline of Amazon in the past two months.
Tesla’s tweet announcing the stock split was the company’s most popular in recent times, with a large number of retail investors expressing support in the comment section. In addition to Tesla, another company owned by Musk, SpaceX, also reported a stock split last month. In related reports, SpaceX is conducting its first stock split, planning to split its common stock on a 1-for-10 basis. SpaceX’s market cap has surpassed $100 billion.
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