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Tesla Will Conduct A Stock Split At The Rate Of 5:1

Tesla Will Conduct A Stock Split At The Rate Of 5:1

American electric car manufacturer Tesla Inc. will split common shares at a rate of 5:1 to make the company's securities more accessible to its employees as well as investors.

"Each shareholder from the register on August 21, 2020, will receive a dividend of four additional ordinary shares for each of the company's securities owned by them after the market closes on August 28," Tesla said in a press release.

Trading in Tesla shares with a split adjustment will begin on August 31.

Tesla's securities, which have been publicly traded since 2010, have more than tripled in price since the beginning of this year, making the company the world's most expensive automaker. Over the past 12 months, their cost has soared almost six times.

Tesla CEO Elon Musk tweeted earlier this year that he believes the company's share price is "too high." He also said that shareholders should discuss the possibility of splitting Tesla shares at the annual meeting of shareholders. This meeting was postponed until September due to the coronavirus pandemic.

The increase in Tesla's share price is due, in particular, to the fact that the company last year began production of its Model 3 sedans at a new facility in China. That partially offset production losses related to the forced suspension in March of its American plant located in the San Francisco area, due to a coronavirus pandemic, writes The Wall Street Journal.

Besides, this year, Tesla began selling the Model Y electric crossover, and even before the pandemic, it gained a portfolio of orders that allowed it to maintain steady sales during a period when potential buyers were sitting at home due to current restrictions.

Tesla plans to build its first European plant, which will be located near Berlin, and also intends to erect another plant in the United States - in Austin (Texas).

In the last four quarters, Tesla has remained profitable.

In July, on the stock split at the rate of 4:1, announced Apple Inc. This practice has been actively used by companies in the past when the share price rises above $100 per paper, but it has become less popular since the dot-com crisis of 2000. This year, only three companies in the S&P 500 index, including Apple, have announced such plans. For comparison, in 1997, their number was 102, and, for example, in 2016 - 7, according to data from Charles Schwab.

A split of shares does not change the value of the company, although it usually contributes to a short-term increase in the share price. This step is usually taken to expand the circle of potential investors at the expense of those who may be deterred by too high a price.

In additional trading on Tuesday, the company's shares rose in price by 6.5% to $1464.