Tesla Stock Is Falling After a Blowout July. A Shareholder Vote on Stock Split Looms.

by Eren Rosa
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Tesla’s shareholder meeting is on Thursday.

Nicolas Asfouri/AFP via Getty Images

Tesla stock was slipping back Tuesday amid a wider dip in stock markets as a crucial shareholder meeting later in the week neared.

Shares in Tesla (ticker: TSLA) were 0.7% lower in premarket trading, compared with futures tracking the tech stock-heavy Nasdaq index, which fell 0.8%. Investor sentiment was wavering amid rising geopolitical tensions between the U.S. and China over Taiwan, which is a center of chipmaking crucial to the global tech industry.

But the recent dip belies what was truly a blowout month for Tesla stock. The shares rose 32% in July, marking the best month since October 2021.

The stock market is likely to continue focusing on the economic outlook this week, with a number of closely watched jobs data releases — but Tesla has another major catalyst altogether. The company’s shareholders will meet on Thursday to vote on key measures, including the proposal of a 3-for-1 stock split.

While a stock split doesn’t make a company intrinsically more valuable, it has benefits. For starters, bulls believe that a split signals to investors that management is optimistic about the future. No company splits a stock it expects to fall. What’s more, splitting a stock makes shares more affordable to retail investors, a class of trader that has proven to be influential.

Retail investors matter to Tesla stock. Only about 54% of Tesla stock is held by institutions, according to Bloomberg. The comparable number for Alphabet (GOOGL) is about 85%.

Tesla split its stock 5-for-1 back in August 2020. From the time the stock split was declared until it happened, shares rallied an incredible 81%. Investors probably can’t expect a repeat of that performance.

Back then, the move took Tesla’s market capitalization from about $275 billion to $500 billion. Tesla’s market cap today is about $930 billion. An 80% move from today’s level would make Tesla more valuable than Alphabet .

Other matters before Tesla stockholders Thursday include the reelection of board directors. Two proxy advisory firms are urging investors to vote against the reelection of two directors in particular, and vote for just six of eight shareholder proposals, against the company’s wishes.

Write to Jack Denton at jack.denton@dowjones.com

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