CEO of Tesla Motors Elon Musk reacts following the company’s initial public offering at the NASDAQ market in New York June 29, 2010
Brendan McDermid | Reuters
Shares of Tesla closed 13.12% higher Wednesday as investors continued to rally on the company’s five-for-one stock split announcement.
The split changes nothing fundamental about the stock. It lowers the cost of an individual share. That may appear attractive to retail investors who may have be scared off by a high price tag, though investors are also able to buy fractions of a share for whatever they’re willing to pay.
“Any value in the stock that’s created by this is false,” CNBC’s Jim Cramer said on “Squawk Box.” “But I think the idea of getting newer, younger people involved into the stock market who aren’t just brainwashed to put money into index funds is terrific.”
Analysts also pegged the stock split as a reason for Wednesday’s bump.
“While stock splits don’t create value per se, and institutional investors are typically largely indifferent to them, Tesla’s stock price reacted very positively yesterday after the market close,” Deutsche Bank’s Emmanuel Rosner wrote in a note to clients. “This is likely because Tesla has a very large retail investor following, and the stock split essentially lowers the bar for small investors.”
Tesla stock has soared more than 500% in the last 12 months. It’s trading at more than $1,560 per share as of Wednesday afternoon.
