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The Tesla stock split experiment

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Abstract

On August 11, 2020, at 16:59 EDT, Tesla announced a 5-for-1 stock split. The trading in the after-market and during the subsequent 2 days amounts to a unique financial economic experiment. Although stock splits have no fundamental impact on value, Tesla’s stock price rose 17.94% in the 2 days following the split—adding almost $50 billion in market value. This paper examines that price increases in detail and concludes there is no rational explanation for the size of the run-up following Tesla’s stock split announcement.

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Notes

  1. Shiller’s most famous paper in this regard is Shiller (1981).

  2. Calculations are based on 186.36 million shares outstanding.

  3. See Bennett et al. (2020) for a recent contribution and the associated bibliography.

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Correspondence to Bradford Cornell.

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I would like to thank Andrew Cornell, Shaun Cornell, Aswath Damodaran, Bala Dharan, Richard Gerger, Campbell Harvey and Jason Hsu for helpful comments.

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Cornell, B. The Tesla stock split experiment. J Asset Manag 21, 647–651 (2020). https://doi.org/10.1057/s41260-020-00191-0

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  • DOI: https://doi.org/10.1057/s41260-020-00191-0

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