Two years ago, he said on social network that he wanted to "privatize" the company, which led to a huge fine from regulators and agreed to resign as chairman for three years. The lowest closing price for the month fell to $185.

Two years later, he decided to split the company's common stock at 1:5 in the form of a dividend, allowing "employees and investors to get more shares." The company's share price went up and down that day, closing at $1374. In two years, the stock has risen more than 600%.

This is Musk who loves zuo and his Tesla, Inc..

Zuo again?

Shortly after the market closed, Tesla, Inc. announced that the company's board of directors had approved and announced a 1:5 split of its common stock in the form of a dividend.

According to the announcement, each common share held by each registered shareholder as of August 21, 2020 will receive an additional dividend of four common shares, which will be distributed after the close of trading on August 28, 2020. Tesla, Inc. shares will begin trading on the basis of stock segmentation and adjustment on August 31, 2020.

Analysts pointed out that after the split, the number of shareholders who now hold Tesla, Inc. shares will increase fivefold, but accordingly, the share price will also shrink fivefold. Tesla, Inc. said that this move will lower the threshold for the purchase of Tesla, Inc. shares and attract more potential investors to buy Tesla, Inc. shares.

Obviously, this is the first stock split since Tesla, Inc. went public.

As a controversial new energy car company (the focus of the dispute is Musk himself), its share price was as low as $211 at this time last year. Even in early March, it fell to about $350. But in the next five months, Tesla, Inc. 's share price sat on the Rockets.

After the news was announced, Tesla, Inc. 's share price was about $1375, and the company's market capitalization exceeded $250 billion. It is already one of the most valuable companies in the world, and almost three times the combined market capitalization of long-established competitors such as Ford, General Motors Co and Fiat Chrysler.

I remember that about two years ago, Elon Musk, then chairman and CEO of Tesla, Inc., mentioned on social media that he was considering privatizing Tesla, Inc. with "financial guarantee." Tesla, Inc. then "publicized" an email Musk sent to employees and described his reasons (mainly because he thought the company's share price was grossly undervalued). But a few weeks later they overturned these claims one after another, announcing that the company would continue to go public.

But Musk's remarks attracted the attention of the Securities and Exchange Commission and even decided to file a complaint of "securities fraud" against Musk. In the end, the two sides reached a settlement, and under the settlement agreement, Tesla, Inc. agreed to add two independent directors to the board of directors, and Musk resigned as chairman.

Since then, Tesla, Inc. shares have been bumpy in their falls, and it was not until they hit bottom on March 18 this year that they began an incredible surge. During this period of stock price volatility, although the share prices of traditional car companies such as Ford and General Motors Co have also hit new lows, Tesla, Inc. 's share price has always been "only lower but not lowest".

Some analysts say that Tesla, Inc. 's share price has soared 500% in the past five months, perhaps because Musk has buried the idea of a "spin-off", so will today's 1:5 split be a reasonable explanation for the rapid appreciation of its share price?

No one knows, and according to Wall Street analysts' calculations, Tesla, Inc. 's share price will still be around $297 after the split.

Continue to do high market capitalization and stock prices?

Stock splits are a way for listed companies to make it easier for retail investors to get shares, which will attract more individual investors who want to trade small amounts. However, in US stocks, brokerages are becoming more and more attractive to customers to buy corporate shares, which makes the benefits of Tesla, Inc. 's stock split no longer as obvious as it used to be.

Although the stock price has risen astonishingly in the past six months, and even pushed up Tesla, Inc. 's market value to more than 280 billion US dollars, but think calmly, is Tesla, Inc. worth it?

Is it reasonable that the market capitalization of the world's largest carmaker is about $100 billion higher than that of Toyota, its second biggest competitor?

With Toyota, Tesla, Inc. 's current valuation exceeds that of almost all its competitors combined. But take a look at this set of figures: Tesla, Inc. delivered only about 90000 cars in the second quarter of this year (but valuations are still high). By contrast, Toyota sold more than 148000 cars in North America in June alone, with a total of 347500 sold in the global market in a month.

No wonder analysts have warned investors that Toyota's profits are sizeable, and although its performance has been affected by the epidemic, it is expected to generate an operating profit of $4.66 billion this fiscal year. Tesla, Inc., by contrast, made a profit of only $16 million in the first quarter of this year.

Of course, Tesla, Inc. 's advantage is its high gross margin (20 per cent in the first quarter, compared with 17 per cent for Toyota and less than 10 per cent for all three US carmakers). As Tesla, Inc. increases car production, it can be expected that its profit growth will gradually accelerate in the next few years.

But will this support the current market capitalization of $260 billion?

Some analysts believe that Tesla, Inc. 's stock split has other profound implications-such as joining the S & P 500.

Earlier, Apple Inc announced plans to split its share price, which was Apple Inc's first split since 2014. Stock splits have become rare in US stocks in recent years, according to the S & P Dow Jones Indices: only three S & P 500 stocks were announced in 2020, compared with an average of 10 in each of the past decade.

Tesla, Inc. announced in July that it continued to make a profit in the second quarter as cost-cutting and strong delivery capacity helped it offset the negative impact of coronavirus-related factory closures. At the same time, the information sweeps away all the problems that could prevent Tesla, Inc. from being included in the S & P 500.

Although Tesla, Inc. is still considered to lack the ability to make a sustained profit, and many institutional investors have been "hiding" the stock for nearly a year, Tesla, Inc. still has a strong following among individual investors.

It is clear that the split of Tesla, Inc. 's shares will not affect the decision of the S & P Dow Dow Jones Indices to put it in the bag. Because the weight of the S & P 500 index is based on the overall stock market value of each listed company.

Concluding remarks

Judging from the actual returns brought to investors by the stock split, the stock split will not reduce the market value of Tesla, Inc.. Although Tesla, Inc. 's share price is now trading at 112 times its expected earnings over the next 12 months, according to Refinitiv, a data analysis firm.

By the way, General Motors Co currently trades at 8 times forward earnings and Ford at 45 times forward earnings.