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Tesla Share Split Becomes Official Today

By Lou Whiteman – Updated Aug 31, 2020 at 8:56AM

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Investors today own a lot more shares, but the underlying value of their investment should not change.

Shares of Tesla (TSLA -0.19%) on Monday will trade at a price much lower than Friday's close. But that's no reason for investors to panic.

The automaker's previously announced 5-for-1 stock split is set to take effect at the opening bell, meaning that holders will own five shares for each share they held prior to the opening. The price will be adjusted accordingly: Tesla closed at $2,213.40 on Friday, which is $442.68 per share following the split.

Tesla's Model Y on a sand track.

Image source: Tesla.

Tesla shares have had a great year, soaring 430% so far in 2020, and the split could add to that momentum. Although the underlying value of the company and its shares are not altered by the split, some investors anchor in on share prices, and the lower price could attract additional interest.

There's a lot of growth baked into Tesla's current valuation. The company's $417 billion market capitalization is nearly double that of larger automaker Toyota Motor, and currently values Tesla at more than $1 million per vehicle delivered during the previous 12 months.

Tesla is one of two large Silicon Valley companies that have announced stock splits, with Apple also doing a 4-for-1 split on Monday. Shares of both companies have rallied since the splits were announced, with Apple shares up by 30% and Tesla shares up by more than 60%.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Tesla. The Motley Fool has a disclosure policy.

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