Dear Investor: Evaluating How Many Times Tesla Has Split Its Shares

As an investing analyst closely following Tesla for years, I‘ve been asked numerous times about its hotly-anticipated stock splits. Share splits may seem purely cosmetic, but as we‘ll explore, they‘ve had real impacts in making TSLA stock accessible for more investors and employees.

First, what exactly are stock splits? I‘ll overview why they matter, then analyze the history and effects of Tesla‘s past two splits. Finally, we‘ll evaluate if further splits may occur and how that could reshape ownership.

Stock Splits 101 – Not Just Math Magic

Simply put, stock splits increase the number of shares outstanding by dividing each one into multiple shares. A 1-to-5 split turns 1 old share into 5 new ones. Splits sound technically mundane – Ownership % and values all remain proportional. However, splits significantly reduce the share price and therein lies the magic…

Lower nominal prices unlock access for more individual investors, boosting everyday trading activity. Previously priced out fans can finally buy slices of their favorite companies! Employees also benefit as cheaper share prices make stock-based compensation more impactful and flexible.

While splits themselves don‘t directly change corporate fundamentals, increased demand often lifts valuations higher long-term. Companies will typically split after major run-ups when prices get unwieldy high. Declaring a split also signals management‘s confidence.

Let‘s see how this has played out for Tesla shareholders over time…

August 2020 – Tesla‘s First Ever Stock Split

Tesla had amazed and confounded Wall Street since its 2010 IPO by defying skeptics…and gravity. The audacious Elon Musk captivated loyal followers as Tesla disrupted autos and batteries despite years of losses. Still, the exponentially growing but unprofitable OEM sported a stratospheric valuation topping $300B.

By mid-2020, the pandemic had shocked markets and economies but left resilient Tesla as the world‘s highest valued automaker. Q2 profits and frothy optimism further launched TSLA stock into orbit – +700% year-to-date!

However, shares traded around $2,500 by August, alignment issues were emerging. On one hand, Tesla‘s valuation was now larger than the whole S&P 500 Energy sector. On the other, sky-high prices barred everyday investors from riding the moonshot.

To bridge this divide, Tesla announced a 5-for-1 stock split on August 11th, 2020. Let‘s examine the split‘s effects for shareholders:

^*projected

While maintaining valuation, the 5x split would create 4 new shares for each current one. Ownership expanded as slices narrowed to 1/5th the price.

Notably, Tesla stock revved up another 60% in just the next 3 weeks into the late August split! Shareholders enjoyed quite the value-boosting lead-up gift. FOMO lifted Tesla‘s market cap over $600B ahead of the higher retail accessibility.

Thomas Edison once said vision without execution is hallucination. For Tesla, the split marked tangible progress bridging the masses to its clean energy vision. I too bought my first shares just after the split at those new lower prices. Call me crazy, but we believers outnumber the skeptics!

In the year Post-Split, retail investors swarmed TSLA stock like cybertrucks to a supercharger. Individual ownership nearly doubled in 2021 to over 40% of shares, estimated Morgan Stanley. With prices cut by 80%, more Americans could finally afford to directly ride Tesla‘s disruptive rise.

Trading activity also accelerated ~40%, empowered by slender fractional purchase costs. Tesla achieved its goals – liquidity rose as a wider array of investors accessed shares. Despite no assets added, Tesla‘s cheaper access helped lift its market cap an additional nearly $300B.

August 2022 – Tesla Splits Again Amidst Market Turmoil

Fast forward 18 months beyond the original split…Tesla faced a very different backdrop. Spectacular expansion had continued, with trailing revenues quintupling to $53B and deliveries reaching over 300k vehicles.

However, logistical challenges left inventories alarmingly lean. Critics also questioned if growth could continue without subsidies, tax credits, or barely increased production capacity. Geopolitical tensions and supply chain chaos fueled inflation which led the Fed towards tighter monetary policy.

After retreating 25% from highs, Tesla shares traded around $1,000 pre-split – too rich for some retail budgets. With dad jokes but strategic precision, Tesla declared a 3-for-1 split on March 28, 2022 to yet again enhance access. Employees also cheered the chance to maximize compensation value.

Let‘s analyze the second split‘s impact:

^*projected

This time, ownership tripled as share counts ballooned 3x through the split machinations. Prices were slashed by almost 70% to about $330, neatening fractional purchases. Tesla‘s value and shareholders‘ proportional control rights persisted unchanged, just represented through more shares.

While reaction was more muted amidst external turbulence, the split still ultimately succeeded in spurring ownership breadth…

Retail activity in Tesla stock surged nearly 20% in the surrounding month vs just 7% for the S&P 500 per Vanda Research. Volumes also expanded over 50% in the immediate days following. Employees benefitted through greater share quantity from compensation.

Plus, by August Tesla shares had rebounded 40% off summer lows completely countering the broader market slide. Price was no longer a barrier to buy Tesla for my next-door neighbor, who added during the dip! Sentiment stayed resilient as lower nominal prices increased incremental trader speculation.

While splits alone obviously can‘t counteract external crises or inject profits, Tesla continues realizing the benefits of enhanced retail accessibility.

• Tesla ownership breadth expands each time prices split downward
• Trading liquidity consistently improves as more individuals participate
• Employee compensation alignments strengthened
• Price barriers lowered enabling more believers to join our ride

So with shares once again above $250, will we see round 3?

Analyzing Future Split Potential Based on Share Price

Tesla has now executed two splits over the past 3 years as its disruptive story captivates investors. The lower nominal share prices successfully enhanced retail participation through heightened liquidity and demand.

You might ask – "But shares are 1/4th their 2021 peak, why would Tesla split now?"

Great inquiry! Tesla actually still trades richly on an absolute nominal basis and relative to auto peers at ~$270.

Absolute Price – While off all-time highs, $250+ prices still limit fractional purchase flexibility and options trading viability for some mainstream investors. Retail players have shown willingness to step in more aggressively below $200.

Auto Sector Comparison – Tesla trades at nearly 100x forward Price/Earnings ratios vs low single-digit multiples for competitors. A 3rd split could steer share prices closer in line to industry norms while relativizing Tesla‘s enormous growth.

Elon himself has said recruiting talent is also tougher when shares sit extremely higher than peers. For employees, stock compensation drives more impact when aligned closer to average auto pay scales.

Analyzing Tesla‘s past two splits, we notice consistency in timing and price trends:

• Both executed around late summer
• Followed share price increases 2-4x above prior ranges
• Splits triggered once shares reached very high absolute nominal prices of $1,000+

This split history provides clues to gauge future likelihood. If TSLA stock revisits all-time highs above $400 in 2023, likely crossing $1,000 again soon after, I forecast a stock split as virtually guaranteed by late summer.

My models suggest that in a bull case of 50%+ delivery growth continuing the next few years, Tesla stock could eclipse $600 by mid-2023. Applying the historical 4x multiple pre-split indicates potential for shares to then exceed $2,500!

At those nouveau price orbits and magnitudes above industry norms, Tesla would face extreme pressure to split for basic institutional investability. Even the most fanatical retail bulls struggle to build positions when prices enter four digits.

Therefore, while timing is uncertain, further splits seem inescapable if Tesla sustains hyper-growth and a return to prior valuation peaks. Musk & Co. have established splitting shares at opportune moments as a critical tool for perpetuating accessibility.

I‘ll be ready with my trading hat to seize the next lucrative discount!

Conclusion – Splits Drive Share Access, Liquidity Tailwinds

Tesla has steered strategy not just with vehicles, but also financial engineering to widen ownership through 2 value-accretive stock splits. As shares reduced nominal prices 80-90% each time, everyday investors finally gained purchasing power to ride the accelerating disruption. Employees also won more beneficial equity compensation alignment.

Trading activity, liquidity and market cap valuations all consistently benefitted as prices split downwards. While market conditions and growth rates fluctuate, Tesla remains uniquely poised to drive the future of transportation.

I expect additional splits inevitable if Tesla‘s valuation expands further the next few years as demand widens for its products and culture. Prices seem likely to eventually exceed the peaks that previously triggered splits.

So buckle up for the long ride shareholders! While volatility will surely endure given Tesla‘s daring ambitions, by strategically splitting shares amidst ascents, Musk engenders support to democratize clean energy ownership.

Please feel free to reach out with any other questions on my financial analysis!

Expertly yours,
[Your name]