Tesla and stock split. 5: 1 split will allow for further increases?

Were it not for the fact that there are no coincidences in the financial market, one could write that this is the perfect time to split shares. Just when the price Tesla reached the astronomical 2,2 thousand. USD per share was a 5: 1 share split. This means that every investor will now have five times as many shares. It will also be easier to buy them, because each share is divided into five - the same as its current price.

Stock split, or what?

A share split is to increase their number without increasing the company's capital. This describes the action that takes place when actions (usually expensive) are divided into more parts to increase their liquidity and availability. So from today we have five times as many Tesla shares in the market, but the market price of each has been automatically split into five, so Tesla's market valuation remains the same. At least she stayed before the session started, because then we had the opportunity to observe the market behavior that was common in such cases: nervousness caused by the fact that some less experienced investors did not know what had happened with the price and the calculated moves of big players who decided to take advantage of this confusion in cold blood.

Tesla stock peak and stock split

We will also have confusion on the chart. Until recently, Tesla reached its peak. The stock traded at $ 2318 on Friday, and finally - at the end of the day - was priced at $ 2213, an all-time record for this automotive company. This, of course, was beyond the capabilities of some small investors who could not afford to buy even one share of the giant. Now there will no doubt be more people who can afford to invest in Tesla.

In the last year, Tesla's shares went up by 500%. Despite better financial results, the price-to-book ratio is currently 26, which is unique in the industry. For Toyota or Ford, the C / WK does not exceed 1.

You don't need to be an expert to notice that Tesla is valued much higher than its competitors. And even taking into account the technological advantage and bright prospects for the electric car market. On the other hand, there is talk of a correction all the time, and Elon Musk's shares are setting new records.

Tesla stock chart and price split, D1 interval. Source: xNUMX XTB.

Buying the future or a speculative bubble?

It is also worth noting that it was similar in 1999, when other companies decided to split shares at the top of the internet bubble. Many people seem to think the same, because according to data from S3 Partners, Tesla is the most frequently shorted (i.e. investors bet its price will drop) company in the world. The value of short positions on Tesla is already over $ 16 billion. But shorting companies in a strong uptrend is also a huge risk, which most speculators playing in this way have already found out - the sorters have already lost over $ 20 billion in this way. Only this year.

Will the uptrend finally stop after the split? From a psychological point of view, there will be even more room for growth. From the economic ... It remains to write that Tesla is currently one of the 20 highest-valued companies in the US, is worth more than a dozen famous car manufacturers in the world combined, and even Elon Musk himself wrote on Twitter that the valuation of shares (which that his fortune is growing) is ... too high.