
Tesla 5-1 Stock Split - ikarandeep
https://www.sec.gov/ix?doc=/Archives/edgar/data/1318605/000156459020039353/tsla-8k_20200811.htm
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sfblah
Does anybody else share my sort of shell-shock WRT Tesla? I'm one of those who
thinks its stock (and probably all the big tech names) are in a bubble. But
whenever I say that I get shouted down, downvoted, told I'm an idiot, etc. I'm
hoping this comment is vanilla enough to be safe... just curious if others
have had the same experience.

To be clear: I'm not interested in debating the value of Tesla. I'm curious if
others have the same emotional reaction at this point. That's it. If you think
Tesla is worth $1T, good. Fine by me. I don't want to debate it or be told I'm
a piece of garbage.

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o-__-o
If they can successfully enable fully automated self driving cars, then I
think the value is entirely justified. See FaceBook.

Disclaimer: I bought Tesla calls today and now assume I’m rich so your opinion
may differ

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nine_k
I bet on self-driving trucks instead. They can go like 95% of the way via
highways driverless, only accepting a driver to drive it through a city to a
loading ramp, and maybe to a pump midway a very long trip. Drivers will not
disappear soon but will provide local service.

Having a driverless _car_ which can navigate through a city would be great,
but it is a much more complicated problem to solve.

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mac01021
Is there a good asset to buy to bet on those?

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nine_k
I wish I knew! There are a few, and different experts suggest different
winners.

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nradov
The whole notion of individual shares with prices is legacy baggage from
decades ago when trading was done with paper stock certificates. What really
matters is the percentage of the company you own, regardless of how that
percentage is sliced into units. Some retail brokerages already offer
fractional share tracing so for those investors a stock split is mostly
irrelevant.

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dripton
Meh. Total non-event. Once upon a time I hated splits because they made
record-keeping more complicated, but the online brokers do a good job of
tracking basis across splits now. Once upon a time there was a real reason to
do splits to enable easier purchases, but the online brokers allow fractional
shares now. So, just not excited either way about splits anymore.

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riffraff
Matt Levine made me notice that there's still an effect of stock splits on
making options more accessible i.e. there are brokers for fractional shares,
but not options on fractional shares/fractional options.

I am pretty sure this is irrelevant, but it's interesting.

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gzu
Speaking of splits, I love how Apple’s stock split justification is: “We want
Apple stock to be more accessible to a broader base of investors.”
[https://investor.apple.com/faq/default.aspx](https://investor.apple.com/faq/default.aspx)

Yet it’s one of the top stocks held on Robinhood (#3 at 700,000 users)

[https://www.robintrack.net/symbol/AAPL](https://www.robintrack.net/symbol/AAPL)

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ogre_codes
Apple is in the DOW and the DOW is a stupidly weighted index where share price
affects what percentage of the index that company holds. Right now a 1%
increase in Apple pushes the DOW up 10 times more than a 1% increase in Cocoa
Cola.

Companies in the DOW _tend_ to have share prices below $500/ share and most
are under $200 and the DOW won't add companies with high stock values as a
result (Apple was added only after their last split).

It's likely being in the DOW bolsters and stabilizes stock prices as a lot of
indexes are based on a the DOW. It also brings a company a certain prestige.

Whether any of this affects the Apple board's decision to split the stock or
not is entirely speculation... it just seems a far more likely reason than the
idea that they are splitting to make it accessible to people with $500 they
want to invest.

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njarboe
Very few people invest in the basket of companies that make up the Dow Jones.
Its use as an index of how the stock market is behaving is really a historical
artifact at this point. One ETF in the top one hundred [1] ETFs is based on
the Dow Jones Industrial Average and that one is ranked 43rd. Joining the S&P
500 is a big deal, on the other hand, as the three biggest ETFs are S&P 500
funds.

[1][https://etfdb.com/compare/market-cap/](https://etfdb.com/compare/market-
cap/)

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ogre_codes
Fair enough. Even so, I think inclusion/ exclusion in the DOW is far more
likely to affect Apple's choice to split or not than making the stock more
accessible to investors.

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betterunix2
I doubt it, and I think there is a misunderstanding about the investors Apple
referred to in their public statement on the split. As a company's share price
rises the stock becomes less liquid, because trades happen in smaller
quantities; Berkshire Hathaway's class A shares are probably the most extreme
example. Low liquidity is a problem for mutual funds, which have to sell
assets whenever an investors sells their shares in the fund (which may be a
relatively small sale e.g. a retirement account distribution), because low
liquidity makes asset sales more difficult. In general institutional investors
will have liquidity rules that constrain the assets their funds can hold to
avoid that kind of problem.

Given how much investment capital is held by institutional investors,
companies have a good reason to split their shares if the share price is too
high. Berkshire Hathaway created a new share class to support the needs of
institutional investors, and I would read "accessible to investors" as
"conforming to the liquidity requirements of institutional investors."

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nine_k
A more informative link [1], also on sec.gov, explaining the nature of the
operation, says:

 _PALO ALTO, Calif., August 11, 2020 – Tesla, Inc. (“Tesla”) announced today
that the Board of Directors has approved and declared a five-for-one split of
Tesla’s common stock in the form of a stock dividend to make stock ownership
more accessible to employees and investors. Each stockholder of record on
August 21, 2020 will receive a dividend of four additional shares of common
stock for each then-held share, to be distributed after close of trading on
August 28, 2020. Trading will begin on a stock split-adjusted basis on August
31, 2020._

[1]:
[https://www.sec.gov/Archives/edgar/data/1318605/000156459020...](https://www.sec.gov/Archives/edgar/data/1318605/000156459020039353/tsla-
ex991_6.htm)

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Xcelerate
I don’t really understand stock splits. Is the only point to allow people to
buy shares who could previously not buy because one share was too expensive?
If so, why not just introduce fractional shares into the stock market with
some fixed point number of decimal places? Or just keep track of ownership
fraction (e.g. 0.0043% of the company)?

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rich_sasha
There are weird incentives for this.

In US the tick size for any stock is always $0.01. So a stock with a price of
say $1 has a minimum bid ask spread of 1%, which is a lot.

On the contrary, if one share is too expensive, it limits liquidity in a
stock. This is usually bad, though Berkshire Hathaway voting shares are
deliberately kept expensive to stave off speculators.

This then get meta-player. A split suggests the company expects a price
increase, and vice versa (reverse splits area thing too).

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esrauch
It seems very strange; can a share not be worth less than 1 cent, or can it
for ask but not bid?

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cynix
It can be "worth" less than 1 cent. That simply means if you put in an offer
at 1 cent, nobody will buy it, because they think it's worth less.

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esrauch
I meant if the bid-ask spread must be minimum 1 cent, then is it true that bid
can't be lower than 1 cent as long as ask is semipositive?

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hmate9
TSLA stock is up over 7% after hours now. ~$15 billion of "value" created out
of thin air. Sounds ridiculous.

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webXL
About $6 trillion was "created out of thin air" in the S&P 500 since mid
March. But don't confuse value with output or wealth. The market is forward
looking and valuations are pretty unstable long term.

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aeternum
Everything is relative, we're printing a lot of money right now, possibly for
the right reasons. In general though those valuation probably do make sense in
a world where money is plentiful.

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caiobegotti
For reference, here's a short amusing thread about the original Tesla IPO
(even replied by Musk himself):
[https://twitter.com/Mark_Goldberg_/status/129281818458888601...](https://twitter.com/Mark_Goldberg_/status/1292818184588886016)

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firekvz
Hope you guys had some tesla calls :p

