Tesla Plans Five-For-One Split For Its Overheated Shares

Tesl TSLA a is planning the first stock split in the electric-car maker’s history as a public company, a not entirely unexpected move given the rapid escalation in the share price this year and one that may push its top-heavy market cap even higher. 

The board of the Palo Alto, California-based company led by billionaire Elon Musk approved a five-for-one split of Tesla’s common stock on Tuesday. Shareholders of record as of Aug. 21 will receive four additional shares, which are to be distributed after the close of Nasdaq NDAQ trading on Friday, Aug. 28. Trading of the split-adjusted shares starts on Monday, Aug. 31, the company said. 

Shares of the maker of Model 3 electric sedans and Model Y crossovers inexplicably surged throughout most of 2020, despite production and sales disruptions caused by the global coronavirus pandemic. That’s made Tesla the world’s most valuable automaker despite annual revenue and vehicle output that are a fraction of vastly larger rivals including Toyota Motor, General Motors GM and Volkswagen AG. 

Tesla stock more than tripled in value from $413.13 at the end of 2019 to $1374.39 as of Tuesday’s close. Following the news it surged over 13% to finish at $1,554.76 on Wednesday.

The runup in the stock is driven in part by increased purchases by retail investors, and the split may factor that in, Baird equity analyst Ben Kallo said in a research note. “We believe the stock split is a recognition of the fact that the market is increasingly influenced by individual investors, including those looking to gain exposure to next-generation transportation,” he said. “We previously highlighted TSLA as a name which could benefit from the growing retail investor influence.”

The surge in Tesla’s market capitalization has also profoundly enriched Musk this year, helping him qualify for billions of dollars of additional shares of the company as part of a long-term compensation package. Forbes estimates Musk’s net worth at $68 billion as of the close of trading on Tuesday.

His good fortune, happening in the middle of the worst U.S. economic crisis since the Great Depression, has drawn condemnation from U.S. Senator Bernie Sanders who has taken to Twitter to complain. “While 40 million Americans face eviction, Elon Musk has nearly tripled his wealth over the past four months and now has a net worth of more than $70 billion,” Sanders tweeted on Aug. 5.