Tesla shares slip as 3-1 stock split kicks in

By Akash Sriram and Medha Singh

(Reuters) -Tesla Inc's shares slipped on Thursday as a three-for-one stock split announced by the world's most valuable automaker to woo retail investors took effect.

Shares of the electric-car maker, led by Elon Musk, opened at $302 and dipped to $293 in early trading.

Tesla (NASDAQ:TSLA)'s second stock split in as many years follows those by other high-growth companies, including Amazon.com (NASDAQ:AMZN) and Google-parent Alphabet (NASDAQ:GOOGL), and highlight the increasing need to diversify investor base.

Stock splits "certainly have a higher appeal to retail investors, and makes their options more affordable as well," said Art Hogan, chief market strategist at B. Riley.

"Retail investors are a very important cohort for Tesla, and today's stock split is essentially an acknowledgment of that fact."

Austin-based Tesla had debuted at $17 in 2010 and shares sky-rocketed to trade at more than $2,000 at their peak, becoming among the highest priced on Wall Street and making it difficult for small investors to bet on the high-growth stock.

In August 2020, the company decided to split its stock on a five-for-one basis, and breached the $1 trillion in market capitalization in 2021.

The stock closed at $891.29 on Wednesday before the three-for-one split took effect.

The EV maker is the sixth company in the S&P 500 index to have split its shares this year, according to Howard Silverblatt, senior index analyst for S&P and Dow Jones indices.

Tesla's ticker was trending on social media stocktwits.com, indicating increased chatter among individual investors.

The company's shares have fallen about 11% since the company announced in March plans to increase its number of shares.

"In typical buy-the-rumor, sell-the-news style, investors tend to drastically scale back purchases of splitting stocks in the weeks ensuing the effective split date, causing price momentum to slow," analysts at Vanda (NASDAQ:VNDA) Research said in a note.

A stock split does not affect the fundamentals of a company, but makes it easier for individual investors looking to do small trades. However, the benefits of stock splits are becoming less clear as brokerages let customers buy parts of a company's share.

Tesla's shares have fallen about 16% this year as worries over aggressive U.S. interest rate increases and geopolitical uncertainty triggered a sell-off in high-growth stocks.

The latest three-for-one split means that stockholders will get two additional shares for each they owned as of Aug. 17.