Tesla said that the stock split would help its employees and investors with more flexibility in managing their equity and thus maximize stockholder value.
Last week, electric carmaker Tesla Inc (NASDAQ: TSLA) submitted its annual proxy statement to the US SEC while revealing its plan for a three-for-one stock split. Interestingly, the filing shows that this move will help and retain top talent for Tesla.
Tesla (TSLA) Three-for-One Stock Split
Currently, some of the biggest organizations in the world have announced stock splits. Last week e-commerce giant Amazon.com Inc (NASDAQ: AMZN) announced a 20-for-1 stock split after which it has started trading around $120 levels. Similarly, Google parent Alphabet Inc (NASDAQ: GOOGL) will also go for a 20-to-1 stock split next month July 2022.
If the SEC approves Tesla’s proposal, the total number of TSLA shares will triple from 2 billion to 6 billion. Justifying its stock split in the SEC filing, Tesla (TSLA) said:
“Our success depends on attracting and retaining excellent talent, not only through providing a respectful, safe, inclusive and equitable workplace, but also through offering outstanding benefits and highly competitive compensation packages. We believe the Stock Split would help reset the market price of our common stock so that our employees will have more flexibility in managing their equity, all of which, in our view, may help maximize stockholder value.”
A stock split could also see more retail participation as the stock seems affordable to average investors. However, some brokerages in the United States are already offering the provision to buy fractional stocks.
Key Changes at Tesla Board
In the recent proxy filing with the US SEC, Tesla has said that Larry Ellison shall relinquish his duties as a member of Tesla’s board of directors. Ellison currently owns a 1.5% stake in Tesla. The filing also reveals that company CEO Elon Musk owns 23.5% of Tesla’s outstanding shares. Since late 2021, Elon Musk has liquidated a considerable portion of his Tesla shareholding.
Financial giant Vanguard holds 6% of all Tesla shares. Tesla has been one of the top performers on Wall Street, with the company seeing unprecedented growth during the pandemic. In the recent filing, Tesla said:
“While this value appreciation has led to our employees benefiting enormously through the years, we want to make sure all employees, no matter when they join, have access to the same advantages”.
Recently, Elon Musk said that Tesla could cut its workforce by 10% owing to difficult economic conditions. However, he later backtracked saying that the overall headcount of the company would increase.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
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