Tesla, the electric vehicle giant has decided to split its stock so it can pay stocks dividends to its shareholders.
According to a filing by the Securities and Exchange Commission, the electric car maker would ask its shareholders for an increase in the number of authorized shares of common stock.
The filing read, “On March 28, 2022, Tesla, Inc. (the “Company” or “Tesla”) announced its plan to request stockholder approval at the upcoming 2022 Annual Meeting of Stockholders (the “Annual Meeting”) for an increase in the number of authorized shares of common stock through an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Amendment”) in order to enable a stock split of the Company’s common stock in the form of a stock dividend. Tesla’s Board of Directors (“Board”) has approved the management proposal, but the stock dividend will be contingent on final Board approval.”
What you should know
A stock, also known as equity is a security that represents the ownership of a fraction of a company.
If a person owns a stock of a company he or she owns a proportion of the company’s assets and profit. The higher the company’s stock price the higher the profit of the owner of the stock.
A company may need to split its stock to lower its trading price to a more comfortable range for most investors and to increase the liquidity of trading in its shares.
A stock dividend is a dividend paid to shareholders in the form of additional company shares instead of cash. These dividends do not affect the value of a company, but they dilute its share price.
According to CNBC, Tesla’s shares were up more than 5% in premarket trading to about $1,066.
The company last split its stock in August 2020. The shares have more than doubled since that 5-for-1 split took effect on Aug. 31, 2020.
The news comes as Tesla’s stock has struggled this year, slipping 4.4% for 2022 through Friday’s close. That said, it jumped 49.8% in 2021 and surged 743.4% in 2020. The shares have also risen in each of the last five years.
The post Why Tesla is preparing to split its stock appeared first on Nairametrics.
