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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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
- Stock split
- Market efficiency