stock split

12 Aug: Why the Tesla stock split adds no value to the stock

Tesla stock news

Stock splits will have no impact on stockholders’ equity. There are many studies made to investigate whether a stock split is still considered a policy that creates value for the underlying company and the rationale behind such action for companies listed on the NASDAQ. The results of a study indicate a positive market reaction at the stock split announcement and that the liquidity hypothesis explains well the rationale for the stock splits.

So the 5:1 Tesla stock split at the end of August 2020, does not add any value from a fundamental perspective. It does not make the Tesla stock more valuable due to an earnings positive surprise, an increase in profitability, or more positive free cash flows. Yet today August 12, 2020, the Tesla, Inc. (TSLA) stock closed at 1,554.76+180.37 (+13.12%) as it was announced that a five-for-one stock split. It has nothing to do with the fundamental view or the valuation of the company. It will only adjust the price lower when it will take place. Education is everything in the stock market and in investing. Stocks can move for many reasons.