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What a Stock Split Means for Tesla - YouTube
Channel: Tesla Economist
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welcome to the tesla economist please
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hit the thumbs up and remember to
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subscribe you can follow me on twitter
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and talk to me on patreon
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yes what all the fickle stockholders
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wanted a stock split but this isn't any
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potential stock split investors are
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expecting an encore from the last split
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when the last split was announced
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tesla's stock price rallied almost 50
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percent however tesla is about two and a
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half times the size now from what it was
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back then it takes more capital to push
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it up as much as last time but one way
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or another investors and the market will
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still be expecting some movement in the
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stock now once it reached its peak last
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time there was a brief pullback before
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the stock once again surged now if last
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time you try to time the market and sell
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your shares from the inflated split
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announcement you might have thought it
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was smart except after that slight
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pullback a few months later tesla's
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stock price doubled wow that would have
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been really rough if you try to time the
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market like that and even rougher if
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you'd shorted it but at the market close
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at the time of this video tesla's stock
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price jumped eight percent in a day over
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eighty dollars which is actually more
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than i even paid for my stocks yep the
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market seems to love any inkling of
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tesla splitting and this jump was not
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even because tesla stock is going to
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split it's just from the potential we'll
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not even find out if the stock is
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actually going to split for some time
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tesla said that shareholders will vote
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for a stock split at the next
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shareholder annual meeting this year
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right this isn't even an announcement of
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a stock split but a vote on the stock
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splitting to be honest i think it's
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pretty obvious which way the vote will
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go i think everyone will benefit from
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the stock split and clearly this is not
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the end of tesla's growth but this will
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not be for some time the last annual
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shareholder meeting in 2021 was in
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october then in 2020 it was battery day
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in september and in 2019 it was june in
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other words we don't know when this vote
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will occur it could be in a few months
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or towards the end of the year i would
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say that by that time the excitement of
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the stock split would have lost some of
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its energy and the energy be renewed as
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we get closer to the date then when it
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is announced that the votes came in for
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the stock split then we should see the
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stock jump again it could jump 20 or so
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or more investors seem to love tesla
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stock splits tesla isn't the only stock
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splitting as of lately amazon announced
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a 20 for one stock split earlier in
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march alphabet or google also announced
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in february 8 20 for one stock split 2
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of which both of those stock prices are
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trading higher than tesla at the time of
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this recording amazon is about 3400 and
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alphabet 2800 after their splits this
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will take them down to around 170 and
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140 accordingly so you might think that
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tesla is looking for a similar price
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target perhaps in the mid 100s if tesla
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spent 20 for one then the price would be
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in the 50s so i don't expect them to
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match amazon or google if tesla split 10
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to 1 then we're still only around the
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low 100s the last split took tessa's
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stock price to about 400
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therefore i probably would expect
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another five to one split for tesla
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taking the stock price to around two
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hundred dollars a share if it is higher
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like ten for one then that could
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possibly be a really good sign in the
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tesla thinks there is a lot more growth
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to come soon in that stock price as
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otherwise it would fill out a smaller
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split too soon but my money would be for
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five for one it's the same as the last
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one too i actually explained in the past
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about how i thought a tesla stock split
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was coming as i was talking to some
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tesla employees and they were telling me
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that it makes it harder for employees to
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buy shares if the price is too high
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which makes sense and tests are like to
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reward their employees in stocks it's a
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great incentive for them and there are
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multi-millionaires still working at
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tesla as a result of these stock
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incentives this also leads me further to
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think that there is a high chance that
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the stock split vote will pass other
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than that these days there are not the
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benefits of a split that there once was
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due to the fact that a lot of trading
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accounts allow you to buy a fraction of
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a share anyway as in if you only have
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100 to invest in tesla then you can just
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buy a hundred dollars of tesla rather
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than having to save up 1 000 to buy a
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whole share however there are also
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options now options have been getting
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quite expensive lately it can make it a
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lot harder to press that buy button when
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you're looking at five figures just for
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a contract it definitely makes it easier
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and you can diversify more with
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different strike prices or expiry dates
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if you can buy five times as many
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options for the same price as one
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hopefully by the time we're at the
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shareholder meeting i might have
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accumulated some more play money and i
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may buy some options in anticipation of
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this split run right we don't even
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officially know tesla's stock price will
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split how much buy or when again this
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could potentially be an asymmetric
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investment perhaps an 80 chance in the
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shareholder meeting tesla stock splits
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and you could double your money anyway i
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only advise to play this game with money
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that you can literally afford to lose
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now i probably don't have to explain to
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tesla economist viewers how a split
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works and how you will still have just
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as much a proportion of tesla than
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before and all your options will also
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split too it's nice having an audience i
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don't have to explain things to and we
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can just get on with talking about what
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is actually important in the company
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right now we're also hearing about china
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being shut down for another few days yet
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investors are far more concerned about
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the fact there is a split coming i'm
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actually hearing a bit of fud about
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china one analyst claiming that it takes
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a week to ramp up each time and they
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have been shut down twice in march which
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therefore means two weeks of lost
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production of course he made up this one
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week figure entirely and on top of that
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even if it did take a week to ramp up
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well during that week tesla is still
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making cars the shanghai shutdown will
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likely make very little difference in
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deliveries for the year as tesla is
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still facing a chip shortage the chips
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that were not used in the vehicles in
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march well they can be saved for more
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vehicles in april i don't think people
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realize how fast tesla can get these
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production lines let alone how fast
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they're going to in those new facilities
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on top of that we're also hearing about
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andrei kapathi leaving for a few months
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nothing i would read into in regards to
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fsd issues there's obviously a great
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team still at tesla and he sounds like
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he's been working flat out for the last
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five years and could do with a break
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either way none of this made any impact
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to the stock price compared to the
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possibility of a tesla stock split
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another stock split so shortly after the
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previous just goes to show the level of
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growth this company is achieving and
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will continue and we are hearing some
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insane levels of growth targeted for
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this company although they only really
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refer to reduction levels as you know
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i've shown models demonstrating what
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tesla's economies of scale will look
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like the growth that is coming in
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production is going to be seen to a more
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extreme in the actual profits the more
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tesla can ramp up production and reduce
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opex per vehicle then the more
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profitable tesla becomes on top of that
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if tesla can double the speed of the
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production line then that factory is
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suddenly the equivalent of half the
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price in capex per vehicle when testers
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start using more revolutionary new
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manufacturing processes and continue to
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further vertically integrate then the
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economies of scale grow further again
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when more factories are producing
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locally resulting in less transportation
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costs the profits increase again when
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demand keeps getting more and more crazy
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and tesla have to raise prices the
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profits increase again when tesla
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introduces more revolutionary in-house
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batteries that have higher energy
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density and lower cost it increases
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margins immensely all of these are only
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for the car sales business and i'm not
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even including fsd
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like elon says the numbers get nutty
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although he was referring to just rabo
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taxis the numbers are nutty enough
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without robo taxis we are only at a run
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rate of just over 1 million vehicles a
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year which is extremely high for any ev
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company but not so much when compared to
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the equivalent ice companies but i
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repeat again only 1 million a year what
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happens when we get to 2 million what
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about 5 million and what if we hit that
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stage in just a few years tesla's been
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spending years if not over a decade
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getting all its ducks in a row we are
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just about to see them pull the trigger
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and finally this company will get off
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the ground and enter the major leagues
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with actual production numbers and show
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the world what manufacturing scalability
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can really look like also is it possible
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that we could see a repeat of what
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happened last time and another split
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will give this stock another massive
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booster gain and potentially double the
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stock price or possibly hit something
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north of two thousand dollars either way
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never a dull moment as a tesla investor
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thanks for listening please hit the
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thumbs up and subscribe you can follow
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me on twitter and talk to me on patreon
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