Tesla proposes three-to-one stock split

Tesla plans to seek approval for a three-for-one stock split at its annual meeting, according to a proxy filing on Friday.

The company said it wanted to divide its shares to make it easier for employees to manage their stock benefits, which “may help maximise shareholder value”. It also said that retail investors “have expressed a high level of interest in investing in our stock”, and that a split would make the shares “more accessible” to these investors.

The announcement comes as its stock has come under pressure amid a broader downturn in the market, in sharp contrast to Tesla’s last stock split in August 2020.

News of the 2020 split fuelled a 13 per cent bounce in Tesla’s stock the next day, and an 81 per cent rally in the three-week run-up to the split. By contrast, Friday’s news brought a modest 1 per cent after-market gain.

Stock splits do not change the underlying ownership position of a company’s investors, leaving little impact on the inherent value of the shares. Like Tesla, many companies argue they make ownership more attractive for small investors, though investment firms such as Robinhood allow ownership of partial shares, overcoming some of the drawbacks of a high stock price.

The electric carmaker’s shares have been under pressure in recent weeks as tech stocks have sold off amid inflationary pressures, supply chain challenges, and instability caused by the war in Ukraine. The tech-heavy Nasdaq stock index is down 25.8 per cent year to date.

The decline in Tesla shares also comes as its chief executive, Elon Musk, pursues a takeover of Twitter, the social media company.

Tesla’s proposal follows stock splits by Amazon and Alphabet, whose shareholders approved 20-for-one stock splits earlier this year.

Tesla also said on Friday that Larry Ellison will not stand for re-election to its board of directors. The Oracle co-founder joined Tesla’s board at the end of 2018 on a three-year term. His tenure will end at the company’s annual meeting on August 4.

“The board currently expects to reduce the number of board seats to seven upon the expiration of Mr Ellison’s term at the 2022 Annual Meeting,” the company said in the filing.

Ellison owns a 1.5 per cent stake in Tesla, which he disclosed when he joined its board. He has pledged $1bn to help Musk finance his Twitter takeover, becoming part of a group of financiers who are helping the Tesla boss secure funding to complete the $44bn transaction.