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I've been following Tesla for a bit and as of today it is at about 120 dollars a share. This isn't exceedingly high in general for the stock market. But it IS high for its industry. Ford is at about 17 and General Motors is at about 37 and both have been there for a while while Tesla has tripled over the past 3-4 months and may or may not continue to grow.

According to this question's accepted answer splitting is a bit more rare in recent times but the example is also for large tech companies like Google and Apple where the industry is consistently in the hundreds.

So I am just curious if stocks in Tesla's position of being relatively high within their industry historically split in order to drop back down to the industry 'standard' or if it has little to no bearing at all?

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    Do you know what splitting is? What reasons have Tesla shareholders got to split? – littleadv Jul 24 '13 at 20:35
  • If Tesla's price returns back down to 20-40 dollars, investors that follow car stocks may be more willing to invest in Tesla over other car companies where right now Tesla is an outlier that might not get snatched up as readily. – Reafexus Jul 24 '13 at 20:41
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    why would investors care about price of a single stock? They care about valuation of the company, splits don't change that. – littleadv Jul 24 '13 at 20:43
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    @littleadv If a stock performs a standard split and therefore lowers its price, the creation of additional shares at lower value can inject liquidity into the market for the share. Also, smaller investors looking to invest in the company may very well care about the price of the stock since it affects the number of shares they're able to purchase. – John Bensin Jul 24 '13 at 20:53
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    @littleadv It's a debate in the literature, but one idea is that increased liquidity may lead to an increase in share price over the long run, which may be beneficial to the company and it's certainly beneficial to the executives in the company holding options or shares. This opinion isn't universally held or completely explanatory, but it's one idea worth considering. – John Bensin Jul 24 '13 at 21:14
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You ask if Tesla being a car company should feel a pressure to split their stock because their share price is much higher than the other car companies.

But is Tesla a car company? It was founded by Elon Musk who founded PayPal and SpaceX. He sees him self as the next generation of entrepreneurs that came after Jobs and Gates. So he compares Tesla ($142) companies to Google ($856), Amazon ($284) and eBay ($52).

But even if you see Tesla as a car company, Musk sees it more like Audi ($828) or BMW ($100) then he does Ford ($16.30) just because the base price of their models ($80,000+) is much greater than Ford or GM.

The theory is that keeping the share price in a lower range helps investors. But since 40% of the company is owned by mutual funds is that really a concern? Therefore most small investors get the company though a mutual fund.

  • +1. Still, I'd be curious to see an intelligent article or white paper that addresses this. (I agree with you, just wondering if the pros have studied and written on this.) – JTP - Apologise to Monica Aug 17 '13 at 15:21

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