Tesla, Amazon stock splits trigger retail stampede
BNN Bloomberg
Recent proposals from Alphabet, Amazon and Tesla tell us one thing: Stock splits can spark big rallies as retail traders pile in.
Recent proposals from Alphabet Inc., Amazon.com Inc. and Tesla Inc. tell us one thing: Stock splits can spark big rallies as retail traders pile in.
Tesla surged 8 per cent Monday, adding about US$84 billion to the company’s market value, after saying it’s planning a second stock split in less than two years. Amazon jumped more than 5 per cent the day after announcing a 20-for-1 split this month and the stock has been on a tear ever since.
In theory, this shouldn’t happen. A split doesn’t affect a company’s business fundamentals, and investors averse to a stock’s high price tag can simply buy fractional shares instead. Yet splits are causing day traders to pile in, fueling rallies in these companies’ shares.
“We simply cannot fundamentally explain how a stock split can add nearly 1.5 times the market cap of General Motors or one full Volkswagen’s worth of market cap to Tesla almost instantly,” Morgan Stanley analyst Adam Jonas wrote in a note to clients.
Tesla was by far the most-purchased stock among Fidelity customers on Monday, as well as Tuesday as of 9:47 a.m., according to data from the brokerage firm. Amazon’s announcement attracted “significant” retail interest and was likely the biggest factor in the stock’s outperformance during a week when the Nasdaq 100 fell almost 4 per cent, according to Vanda Research.
