Elon Keeps His Twitter Promise and Tesla Soars

After the split, each share—all else being equal—will be worth one-fifth of what it was pre-split. So, for example, if Tesla shares are trading at $1500 per share, and you hold 10 shares, after the split, you’ll hold 50 shares, each worth $300.

Psychology, as a stock price climbs, some investors, particularly smaller ones, may view the shares as too expensive and out of reach. Tesla baby rocks the stock market in 2020, but not every investor took advantage from it because of the share price.  A split, in theory, takes the price down to what may be a more attractive or accessible level, and hence, liquidity increases. Splits often pick up during strong periods for the broader market.

1. PRE-ANNOUNCEMENT: Stocks usually enter this stage quietly and without fanfare after a long period of healthy earnings growth. 

2. ANNOUNCEMENT: The announcement of a planned stock split usually attracts a large number of new buyers and often drives the stock price higher.

3. DORMANCY: There is generally a return to normal price behavior in the weeks following a split announcement as the initial interest subsides and traders take some profits. 

4. PRE-SPLIT RUN: For many stocks this is the most powerful phase of the split cycle as investors dramatically bid up the price of the limited supply of shares.

5. SPLIT EXECUTION: The day of the stock split provides the final announcement to the public that the stock has split. Many investors who watched the stock rise at the announcement and again during the pre-split run will now buy shares at the lower split prices. These final buyers will push prices even higher.

6. POST-SPLIT DEPRESSION: After the last buyers have taken positions, investor interest in the stock begins to fade along with the excitement surrounding the split. Prices will often retreat as shares are sold to lock in profits.