Tesla, the electric vehicle behemoth, has chosen to split its stock in order to pay stock dividends to its owners.
According to a Securities and Exchange Commission filing, the electric vehicle manufacturer intends to seek its shareholders for an increase in the number of authorized shares of common stock.
The filing read, “On March 28, 2022, Tesla, Inc. (the “Company” or “Tesla”) announced its plan to request stockholder approval at the upcoming 2022 Annual Meeting of Stockholders (the “Annual Meeting”) for an increase in the number of authorized shares of common stock through an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Amendment”) in order to enable a stock split of the Company’s common stock in the form of a stock dividend. Tesla’s Board of Directors (“Board”) has approved the management proposal, but the stock dividend will be contingent on final Board approval.”
A stock dividend is a dividend paid to shareholders in the form of additional company shares instead of cash. These dividends do not affect the value of a company, but they dilute its share price.
In other words, if there is a 6-for-1 split, investors will get a stock dividend of five shares for every one share of Tesla they own. This would be a one-time event.
Tesla's stock was up more than 5% in premarket trade to over $1,066 per share, according to CNBC.
The company's stock was last divided in August 2020. Since the 5-for-1 split went into effect on August 31, 2020, the stock has more than doubled.
The announcement comes as Tesla's stock has suffered this year, down 4.4 percent in 2022 as of Friday's closing. Nonetheless, it increased by 49.8 percent in 2021 and by 743.4 percent in 2020. In addition, the stock has increased in each of the previous five years.