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Tesla Stock Split – Buy Before or After the Split? $TSLA

Calvin Lo

Last Friday, Tesla (TSLA) filed for a 3-for-1 stock split with the SEC subject to shareholder approvals at their annual shareholder meeting on 4 Aug 2022. Tesla had previously announced its intention to split its stock back in March.

The only other stock split was a 5-for-1, announced 11 Aug 2020 and took effect 31 Aug 2020. TSLA closed at $1,374 on the day of announcement, was up 6% in AH and subsequently rallied ~80% in those 20 days by the time the split took effect. Of course, that was during a bumper year for TSLA and during a very bullish market. Notably, the stock fell as much as ~34% immediately after the stock split took effect.

This time around, Tesla announced on 28 March 2022 the intention to split the stock. Despite the lack of details, TSLA stock still jumped 8% to ~$1,091 that day. TSLA closed at $696.69 last Friday and was up 1.84% in AH.

I won’t be going into further details of the stock split or what it means for shareholders, but you can refer to the articles below for more information. In this post, I’m sharing my considerations on whether to buy more TSLA stock before the split, after, or not at all.

Read: Tesla files for 3-for-1 stock split | CNBC

Read: Tesla Files for a 3-for-1 Stock Split. Will It Fuel a Bounce? | Motley Fool

What to consider

  • Bearish sentiment. Compared to last split in 2020 during a bull market, this time we are firmly in a bear market mainly due to fears of inflation, war and supply chain issues.
  • Smaller than expected split. Most on social media were speculating that the split would either be 10-for-1 or as much as 20-for-1. The 20-for-1 has become extremely unlikely due to ~40% decline in stock price, but I thought the 10-for-1 might have been in play. The requested 3-for-1 would likely disappoint many investors.
  • Other Big Tech stock splits. Namely the recent Amazon (AMZN) 20-for-1 on 6 June 2022, and the upcoming Alphabet (GOOGL) 20-for-1 next month. Since stock split announcement dates, AMZN is down ~21% (since 9 March 2022) and GOOGL is down ~19% (since 1 Feb 2022). For reference, TSLA is down ~30% since stock split announcement date 28 March 2022.

My thoughts

Although stock splits don’t theoretically create any additional value to shareholders, usually a stock split is cheered by investors due to the underlying confidence in the business fundamentals. However in a bearish market, investors might not attribute any value to stock splits.

A stock split does still make TSLA shares more affordable especially if you don’t have access to fractional shares trading. Options will also become more affordable. However since this will only be a 3-for-1 split, I don’t really see much benefit. Post-split TSLA will still be trading ~$232/share, which isn’t exactly that low a price.

Personally, I don’t think TSLA has hit the bottom especially since we just got terrible US CPI numbers last Friday. I expect bearish sentiment and fears of recessionary risks to continue for the coming months to push the stock market lower.

Since I have access to fractional shares trading through Syfe Trade (referral code: SRPT47KQL) and Webull (sign up link), the stock split doesn’t really affect my decision on when to buy more shares. I’m still bullish on Tesla’s prospects in the long-term and plan to accumulate more shares.

Also, I think the price bump for TSLA from the stock split has probably already occurred at the initial announcement on 28 March 2022 (which quickly fizzled out). Except for a temporary bump in TSLA stock price if the stock split is approved, I don’t see the stock rallying in anticipation of the stock split like the last one.

In essence, I don’t expect a price rally leading up to the split like the last one, unless driven by other positive catalysts or overall market bullish sentiment. So, I won’t be trying to time any short-term trades around this stock split.

That said, I might continue to buy 1 or 2 shares of TSLA here and there for the long term (I’ve already picked up quite a few shares in May) but will probably continue to be patient and wait for a significant pullback to the $450-$550 range (pre-split) for the next substantial buy.

Will you be buying any TSLA stock before or after the stock split? Why?

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Disclaimer: This is not financial advice. I am not professional financial advisor nor do I work in the finance industry. Anything I write here is purely my personal opinion. Please do your own research and due diligence before investing into anything. All investments come with associated risks. Best to consult a financial advisor if you’re still unsure.

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