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Tesla: Should You Buy Ahead Of The Stock Split?

By Anna Peel. Originally published at ValueWalk.

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As Tesla Inc (NASDAQ:TSLA) just filed its annual proxy statement with the SEC, revealing plans for a three-for-one stock split, should you buy ahead of the split?

Tesla’s Stock Split

Scott Sheridan, market expert, and CEO of tastyworks comments:

“Stock splits have definitely become more common of late. We saw something similar back around the dot com crash, though, so it may also be an indicator that a company is running out of ways to try unleashing shareholder value.


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What’s interesting about a split is that it shouldn’t increase the value of a company. But what often happens is that you create demand from people who might not otherwise be able to afford the underlying. They come in, and it can push the price higher. From a valuation perspective, it makes no sense. But that doesn’t mean it doesn’t happen.

In the case of Elon and Twitter Inc (NYSE:TWTR), I don’t think Tesla’s split matters. Elon is looking for an out from that deal. That’s really clear at this point.

For retail traders, I don’t know that I would buy any stock simply because of a split. But given the large drop in price since the start of the year, if you wanted to take a small shot getting long, I wouldn’t have a problem with that. I would probably do something like selling an out of the money put to take advantage of the high volatility and rich premium.”


About tastyworks

tastyworks is an online brokerage platform built specifically for options traders. The up-and-coming online broker is a subsidiary of tastytrade, one of the fastest growing online financial networks in the world. tastyworks was designed by the founders of thinkorswim with sophisticated functionality for complicated options trades and strategies in mind. It has a do-it-yourself approach and provides the technology, education, and support to succeed more easily on your own.

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