Electric vehicle (EV) maker Tesla announced a 3-for-1 common stock split in its notice of 2022 annual shareholder meeting – reports Tesla North.
However, the company needs shareholder approval to authorize additional common stock before it can proceed with a spin-off. Tesla expects a shareholder vote at the annual meeting to increase the number of authorized shares of its common stock from 2,000,000,000 to 6,000,000,000 to facilitate the stock split.
“The primary purpose of the Permitted Share Amendment is to facilitate a 3-for-1 stock split of our common stock in the form of a stock dividend (the “Stock Split”),” the notice read. filed Friday after trading hours.
“As of June 6, 2022, we had 1,036,390,569 common shares outstanding, and the current number of authorized shares of our common shares is 2,000,000,000, which is insufficient to effect the stock split. Our Board of Directors intends to approve the stock split, subject to and subject to shareholder approval of the change in authorized shares. »
A stock split increases the number of shares of a company floating in the market without diluting the equity of existing shareholders. In this case, each existing shareholder will see the total number of Tesla shares they own triple.
Stock splits have also reduced a company’s stock price (in this case, each Tesla share will then be worth one-third of its pre-split value) without affecting its total market capitalization.
Think of it like owning a whole pizza. Instead of selling the whole pie for $10, if you cut it into four slices at $2.50 each, it will attract more buyers at the lowest price. But the overall pizza value remains at $10.
“We believe the stock split would help reset the market price of our common stock so that our employees have more flexibility in managing their equity, which we believe can help maximize value for employees. shareholders,” Tesla said.
The company also hopes that the lower share price will minimize the barrier to entry for retail investors. “We believe the stock split will also make our common stock more accessible to our retail shareholders,” the automaker added.
Tesla’s last stock split was a 5-for-1 split in August 2020. The company’s annual general meeting of shareholders is scheduled for August 4, 2022 at Gigafactory Texas.
Tesla stock has been battered so far this year as part of a broader downtrend in global markets. However, the automaker’s operations are better than they have ever been. Company CEO Elon Musk said last month that Tesla may have to limit orders or stop taking them altogether because demand far outstrips production right now.