The Tesla Stock Split Experiment

Abstract

On August 11, 2020 at 16:59 EDT, Tesla announced a 5-for-1 stock split. The trading in the after-market and during the subsequent two days amounts to a unique financial economic experiment. Although stock splits have no fundamental impact on value, Tesla’s stock price rose 17.94% in the two days following the split – adding almost $50 billion in market value. This paper examines that price increase in detail and concludes there is no rational explanation for the size of the run-up following Tesla’s stock split announcement.

Keywords: Tesla, Valuation, Stock Split

JEL Classification: G00, G10, G12