If you or someone you know has opted to buy Tesla shares in the past couple of weeks, you may have come to find a pretty unusual disclaimer stating that Tesla is currently doing a 3-for-1 stock split. This stock split has a variety of implications, all of which you are going to want to become pretty savvy with if you are still thinking about investing.
In this article, we will be taking a look at Tesla’s 3-for-1 stock split and talking through everything you need to know if you are thinking about investing in Tesla yourself, as well as also going over what exactly a stock split is and why Tesla has chosen to give the go-ahead on this recent development.
Good News For Investors
There are a whole world of pros & cons to stock splits, most of which you are going to want to become pretty familiar with if you are thinking about getting involved. However, in the grand scheme of things, stock splits are generally received positively by investors, as they usually amount to higher profits later down the line.
That’s right; despite what you may assume would happen with a stock split, they are actually good news for investors – there is a good reason why stock splits are becoming more and more popular with major organisations. Stock splits raise the value of a stock through a variety of ways.
For one, stock splits are a pretty good indication that a stock is performing well, letting other investors know that it might be something worth looking into. Secondly, the enticing nature of stock splits incentivises new investors from all over the world to get their hands on a piece of the action – who would want to pass up on getting a lucrative deal from one of the leading companies in the world?
Both of these factors and more mean that stock splits usually raise the value of a stock in the long term, and this is why most investors react extremely favourably whenever a stock split is suggested.
It’s Nothing New
Stock splits are nothing new. This tactic has been utilised by successful companies from all over the world for decades, and more often than not, it often ends up being incredibly lucrative. In fact, Tesla has already done a stock split itself, and the success of their first stock split undoubtedly played a major role in their decision to go through this ordeal again.
Stock splits have historically performed incredibly well in the long term, and the various benefits that an enterprise can obtain from them makes them incredibly appealing. On top of just the financial gains, stock splits also do wonders to reduce stock volatility and increase stability – as we said previously, it is an indication that a company is performing very well.
Just because you may be somewhat unfamiliar with the concept of stock splits doesn’t mean they are not prevalent throughout the investing world, and they are certainly nothing new for high-level/successful companies that have the security to pull off such a stunt.
Stock Splits Are Becoming Increasingly Common
In the modern age, stock splits are becoming increasingly common throughout first-world countries across the globe, and it is likely that we are going to see them explode in popularity in the coming years. This is simply due to the wide number of benefits they give both to the company and the investor – they increase stock value, do wonders for longevity, and give shareholders the confidence they need to hold on to their investments for years to come.
This makes complete sense, and in fact, it would come as more of a shock to see stock splits reduce in popularity. Although, that’s not to say things are all good. One potential consequence that we could see if stock splits become more common is that the impact they have could become minimised, meaning that they would not send off the same positive signals as they once did.
This could even lead to stock splits having the opposite effect, being that they may reduce the value of a stock and increase volatility instead of serving their intended purpose. Luckily, this isn’t all too likely to happen.
Stock splits are likely going to retain their impact for years to come, and unless they begin to become overused, they are going to continue to be a good thing for both businesses and individuals alike.
Hopefully, you will now have a better understanding of what Tesla’s 3-for-1 stock split means as well as how it is going to affect investors. In the long run, stock splits have historically been shown to be incredibly lucrative both for the company and the investors, and if you are thinking of investing in Tesla yourself, this may just end up being a great decision.
We wish you the best of luck throughout your trading journey, and if you continue to devour investing knowledge at the rate you are now, you will be on your way to becoming an expert in no time. Have fun.