Subscribe to Entrepreneur for $5

Tesla Stock Split Has it Trading Around $300 A Share

The electric car company initiated a 3-for-1 stock split.


Tesla initiated a 3-for-1 stock split after the market closed on Wednesday.

The company's stock closed at around $890 on Wednesday, per CNN. The company's shares were trading at about $300 a share at 9:30 a.m. EST on Thursday.

When a company conducts a stock split, it boosts the number of shares without changing how much the company is worth.

Here is how it works: If Tesla was an apple, and it was divided into two pieces, and you owned one of those pieces (aka 50% of the apple) a stock split is like cutting the apple into fourths. You now own two apple slices, but you still own 50% of the apple, proportionally speaking.

It doesn't mean you own more of the apple, just that the portion you own is split into smaller pieces. As Robert Johnson, a professor of finance at the Heider Creighton University told TIME's NextAdvisor: "If you own 1% of the company before the split, you will own 1% of the company after the split."

"Investors tend to like splits because it signals that they are invested in a thriving company," he added to the outlet.

In this particular case, the number of total Tesla shares was multiplied by three. So, if you own one share, you now own three.

Tesla investors okayed this split at their shareholder meeting in early August and said it was to help employees work with existing equity or buy new equity in the company, per CNBC. But, the outlet added, people already could buy "fractional shares" of Tesla.

The company posted about $16 million in revenue in Q2, down from about $18 million the prior quarter, as well as noted shutdowns of its factory in Shanghai.

Entrepreneur Editors' Picks