Stock split is merely cosmetic for company whose valuation seems to be controlled by pure psychology
You have to admire Elon Musk’s stage management. On Monday, the Tesla founder delivered a crowd-pleasing five-for-one stock split, transforming a $2,300 share price into a smaller figure to make ownership “more accessible”. The economic effect of the change was precisely zero – investors just got four additional shares for each one they owned – but Tesla’s shares surged 12% anyway.
On Tuesday, Musk produced a twist. Since investors are clearly keen to throw money at Tesla at almost any price, the company will issue new shares to raise $5bn for “general corporate purposes”. The explanation was gloriously vague but, in Tesla’s shoes, you can afford to be loose. With a stock valuation of $460bn, the new shares represent minimal dilution for existing investors. It would almost be silly not to take advantage.
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