Tesla explains the strategy for its 3:1 stock split

Tesla announced yesterday that it plans to execute a 3:1 stock split sometime after its Shareholder Meeting on August 4. Its last stock split, which occurred in August 2020, made shares more affordable for young and retail investors after the automaker’s stock price had ballooned to $2,213.40.

But the company’s purpose for the 3:1 stock split is slightly different, and is more focused on the employees, according to Tesla’s 14A filing with the SEC, which was filed yesterday.

Tesla said its next stock split “would help reset the market price of our common stock so that our employees will have more flexibility in managing their equity, all of which, in our view, may help maximize stockholder value. In addition, as retail investors have expressed a high level of interest in investing in our stock, we believe the Stock Split will also make our common stock more accessible to our retail shareholders.”

Tesla is amongst the most attractive places to work due to its employee equity programs, which include the Employee Stock Purchase Plan (ESPP). This allows Tesla employees to purchase shares of the company’s stock at a discounted price. Tesla knows its benefits packages are a great way to attract high-end talent for its programs, and a stock split was undoubtedly one way it could rejuvenate the benefit package.

“Our success depends on attracting and retaining excellent talent, not only through providing a respectful, safe, inclusive and equitable workplace, but also through offering outstanding benefits and highly competitive compensation packages. Unlike other manufacturers, we offer every employee the option of receiving equity,” Tesla said. “Since our stock split in August 2020 to June 6, 2022, our stock price has risen 43.5%. While this value appreciation has led to our employees benefiting enormously through the years, we want to make sure all employees, no matter when they join, have access to the same advantages. We believe the Stock Split would help reset the market price of our common stock so that our employees will have more flexibility in managing their equity, all of which, in our view, may help maximize stockholder value.”

Retail investors shouldn’t fret, Tesla still kept them in mind when announcing the 3:1 split. “In addition, as retail investors have expressed a high level of interest in investing in our stock, we believe the Stock Split will also make our common stock more accessible to our retail shareholders,” Tesla said in the filing.