Tesla leaps 7% after 5-for-1 stock split makes shares more affordable

• Tesla stock rallied as much as 7% in early Wednesday trading after the company revealed a five-for-one stock split scheduled for August 28.
• Every Tesla shareholder will receive four additional shares that, when added to their existing share, will equal the stock's pre-split value.
• The split itself won't change Tesla's market cap but may pull in smaller investors who couldn't previously afford shares. The stock closed above $1,370 per share on Tuesday.
• Splitting shares now "is a smart strategic move at the right time," Wedbush analyst Dan Ives said, as Tesla stock has more than tripled so far this year.
• Watch Tesla trade live here.

Tesla shares launched as much as 7% higher in early Wednesday trading after the automaker announced a five-for-one stock split set for later this month.

Every Tesla shareholder will receive four additional shares for every share they currently own when trading ends on August 28, the company said in a Tuesday afternoon press release. The value of all five shares will equal the stock's pre-split closing price from that same day. At Tuesday's closing level, the newly split shares would be worth roughly $274 each.

Trading of Tesla shares on a split-adjusted basis will begin on August 31. The split alone won't change the automaker's market cap. Yet cutting the barrier to entry for smaller investors to buy in could boost Tesla's share price.

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Apple announced a four-for-one stock split in July and promptly rallied as retail traders rushed to the stock. Tesla is following the iPhone maker's lead and should benefit from it, Wedbush analyst Dan Ives said in a Wednesday note.

"For Tesla given its strong retail base and growing appetite among investors around the story/overall [electric vehicle] demand, we believe this is a smart strategic move at the right time for the board to make," Ives said.

The late-August split could serve as the latest booster for Tesla's already-lofty share price. The stock is up about 230% year-to-date, with investors' excitement growing around earnings beats, potential inclusion to the S&P 500, and strong vehicle deliveries amid the coronavirus pandemic. Tesla's current market cap establishes it as one of the world's most valuable automakers, despite its producing far fewer vehicles than legacy names such as VW or Toyota.

CEO Elon Musk hinted at the split on June 30, replying to a Twitter user that a stock split would be "worth discussing" at the company's annual shareholders meeting. Tuesday's split announcement likely surprised some, as the meeting is scheduled for late September.

Tesla closed at $1,374.39 per share on Tuesday.

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