This headline really embodies the level of maturity we've been seeing lately in the stock market.
It's the same thing with Apple stock as well. They announced a split, and for some reason, people are treating this as a bullish event when it's really not.
Yes, stock splits are usually seen as bullish events, simply because they usually happen during a bull market, but it certainly is no cause to rally in and of itself, as the event does not add any value to the company.
For those who aren't familiar with the dynamic of a split, it basically means that you double the amount of shares of the company, but reduce the share price by half.
So if the company has 1,000 shares that are worth $100 each, then each person who was holding one share before the split will have two shares after. However, the price per share will drop to $50. No value is added, and the total market capitalization of the company remains unchanged.
Since Tesla is doing a five-for-one split, it means that each share will now be worth roughly $300 instead of $1,500, but the actual amount of the company that each share represents will be 20% of what it was before.
Tesla shares are up about 12% today. Not that they haven't rallied this hard on less important news, but seeing posts on social media to the tune that this will increase liquidity or allow more money to go into Tesla is just silly.
Almost all retail-facing brokers already offer fractional shares, and their clients have been happily buying chunks of Tesla for less than $300 already.
It's a simple exercise in the dark arts of behavioral economics, which may seem like black magic to some, but really shows that the market is currently full of people with the same level of intelligence as Jen the Pizza girl.
A price of $300 per share sounds a lot cheaper thank $1,500 per share. Since valuations clearly no longer matter, this is clearly a brilliant move by Apple and Tesla.
