Apple, which recently became the first company to reach a $2 trillion in market cap, said that it will execute a 4-for-1 stock split, meaning that investors will receive three additional shares for each one they own. The stock split will go into effect for existing investors on August 24th, 2020 and shares will start trading at the split-adjusted price on August 31st. 

A few weeks later, electric carmaker Tesla also said it will carry out a 5-for-1 stock split. This split means that investors will get four shares of Tesla stock for each one that they own. The split will go into effect for those who are already invested in Tesla on August 21, 2020. The stock will start trading at the split-adjusted price after August 31, 2020. 

Here’s how a stock split works, and what it means for investors.

How a stock split works

When a company decides to split its stock, it’s literally doing just that—breaking stocks into additional shares.

Public companies have a finite number of shares or a total number of shares that they can sell to their stockholders. A stock split increases the number of shares on the market by splitting the current outstanding shares into more shares.

When a company decides to split its stock, it will do so according to a ratio, expressed as X:1, or X for 1. If the ratio is 2:1, or 2-to-1, each share will split into two. 

A stock split reduces the value of each share. For example, in a 2 for 1 split, each share will be worth 50% of the original, single share’s value. But that doesn’t necessarily mean the investment loses value since the two new shares combined have equal value to the original share.

Typically, a company will split its stock when its share price has become so high that smaller investors can’t afford the price of a single share. Some companies today, for example, have stock prices in the hundreds, thousands, or even hundreds of thousands of dollars per share. By increasing the number of shares, or increasing supply, a public company can bring the stock price down without affecting a company’s total value, or market cap.

In the case of Apple, the stock price is around $466 per share. When the stock split goes into effect, the price will be divided by 4. This will be the fifth time Apple has split its stock since going public in 1980. Apple last split its stock in 2014, in a 7 for 1 split. 

Tesla’s stock is trading at around $1,900 per share as of August 19, 2020. The company’s split will divide its share price by 5 when it goes into effect.  Keep in mind that a stock-split doesn’t necessarily mean that the same growth will follow. 

How a reverse stock split works

A reverse stock split has the opposite effect of a regular stock split—it reduces the number of outstanding shares on the market.

When a reverse stock split occurs, each share is converted to a fraction of a share. For example, if you own ten shares, and a reverse stock split occurs that converts each share into 0.1 shares, your ten shares becomes one.

The result is fewer, but more valuable shares. A company may want to increase the value of its shares to avoid being delisted from stock exchanges, in the event that its share price is too low, or to boost its image.

Keeping up with stock splits

Some experts have suggested that the stock splits from Apple and Tesla might inspire other companies with high share prices to split their stocks. For example, Netflix, which last split its stock in 2015, is trading around $500 per share. Amazon, which last split its stock in 1999, trades around $3,300 per share. However, these companies haven’t said that they will split their stocks and there’s no reason to believe that they definitely will.

Stay up-to-date with stock split news—and other market news—with our news update the Weekly Scan and our newsletter The Wallet.

The post Here’s What Apple and Tesla’s Stock Splits Mean For Investors appeared first on Stash Learn.

The electric car company’s stock price increased by 20% on February 3, 2020, making the biggest jump for Tesla in six years. The spike followed Tesla’s positive fourth-quarter earnings which were announced at the end of January, 2020. Tesla remains one of the largest players in the growing electric vehicle industry.

What happened? 

On February 3rd, when the market closed, Tesla’s stock price was at a record high of $780 a share, according to Forbes. The 20% jump marked Tesla’s biggest bump up since May 9, 2013. Tesla’s stock price has increased 120% since the beginning of February, 2019. The price continued to increase on February 4th, 2020 to $887 by the end of day. 

In response to the rally, some analysts have suggested Tesla’s stock price could hit $7,000 by 2024, according to Barron’s.

Tesla stock has been publicly traded on an exchange called the Nasdaq since 2010.

Why the jump?

One reason for the price spike could be Tesla’s better-than-anticipated earnings for the fourth quarter of 2019. Tesla reported $7.4 billion in revenue for the fourth quarter of 2019, a 17% increase compared to the third quarter of 2019. Tesla also announced a net income, or profit, of $105 million for the fourth quarter.

Production of Tesla’s Model Y, the latest SUV from Tesla, is also reportedly ahead of schedule. Tesla’s factory in Freemont, California, is expected to be done building the new car by April 2020. The Model Y is expected to be a little cheaper than the previous SUV from Tesla, the Model X.

Tesla delivered 367,500 cars in 2019. The number of cars delivered increased by 19% between 2018 and 2019 and Tesla plans to deliver 500,000 cars in 2020.

Another reason for the jump could be a practice called short selling, according to the Wall Street Journal. When investors short a stock, they hope to profit from the falling value of its share price. Investors who short sell are betting against a company’s stock. In this case, Tesla’s stock has risen, so short shellers may have to buy Tesla stock to prevent further losses in their positions, according to some reports. That has driven the stock price up even further.

More about Tesla and Elon Musk

Tesla’s recent success comes more than a year after the Securities and Exchanges Commission fined Elon Musk $20 million in September 2018. The SEC also forced Musk to step down as chairman of Tesla after he tweeted that he would take Tesla private. The SEC said the tweet was false and misled investors. 

Musk, who has remained the CEO of Tesla, is considered one of Silicon Valley’s most brilliant and innovative entrepreneurs. In addition to co-founding the payments company Paypal, he also founded the space exploration and transportation company SpaceX.

The rise of electric cars

Electric cars, which operate on batteries that can be recharged at charging stations, are increasingly affordable and popular. To compete with Tesla, U.S. car companies including Ford, General Motors, and Fiat Chrysler, have announced plans to develop their electric car businesses.

The automotive industry still has a long way to go to become less dependent on gas. While sales of electric cars increased by 81% in 2018, there were still only 1 million electric cars on the road. Nearly half of all car sales in the U.S. in 2018 were reportedly for SUVs.

Investing in the planet

Still, climate change is an increasingly important topic for businesses such as Tesla and other car manufacturers. Stash offers ETFs that include clean energy companies and companies that are working to reduce their carbon footprints.

When you invest, remember to follow the Stash Way, which includes regular investing, diversification, and planning for the long term.

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Far from it. In fact, while people bought more electric vehicles in 2018, they purchased even more SUVs, making them the top-selling automobile in the U.S., and potentially cancelling out the positive environmental impact of electric vehicles.

That’s according to the International Energy Agency, in its annual energy report, released November 12, 2019. The IEA is an organization run by a consortium of 30 countries, devoted to developing clean and sustainable energy.

This year’s report predicts that global energy consumption will soar by 2040 under current climate policies, which could also lead to increased carbon emissions and global warming. The agency found growing use of renewable sources of energy such as wind, solar, and hydropower, but it also found the use of nonrenewable resources that create greenhouse gas emissions are rising at a rate that may outweigh any positive impact from renewable energy.

Top Takeaways from the Climate Report

• Demand for energy will increase by more than 1% every year until 2040, according to the IEA.
• Renewable sources of energy such as wind, solar, and hydropower are expected to make up 42% of energy generation by 2030, overtaking coal as the biggest source of energy, according to the New York Times, which viewed the IEA’s entire 800-page report.
• Solar power is expected to become the biggest source of power by 2040, according to IEA.
• Africa has the potential to produce 40% of the world’s solar energy.
• Electric cars, which operate on batteries that can be recharged at charging stations, are increasingly affordable and popular. But sales of SUVs, which operate on gas and are the second-biggest contributor to global carbon emissions continue to increase. Forty-two percent of cars purchased in the U.S. in 2018 were SUVs, compared to eighteen percent in 2000.

SUVs vs. electric cars

Most U.S. car companies are developing electric cars,  to compete with Tesla, the biggest player in the electric car industry. In October 2019, Ford announced plans to start producing electric cars, as well as a national network of charging stations. Ford also announced plans to develop an electric version of its iconic Mustang. Similarly, General Motors said it will soon release dozens of new electric car models by 2023, to add to its Chevrolet Bolt. Fiat Chrysler also announced plans in 2019 to develop electric Jeeps.

Still, consumers seem to prefer driving SUVs. While sales of electric cars increased by 81% in 2018, there were still only 1 million electric cars on the road. Nearly half of all car sales in the U.S. in 2018 were reportedly for SUVs. Last year, there were 200 million SUVs on the road, compared to 35 million in 2010. SUVs are also the second-largest contributor to global carbon emissions, after the energy and power sector, according to CNBC.

*Source: CNBC

The International Energy Agency says that under current conditions, energy demand will continue to outpace the development of renewable resources.

You can invest in renewable energy companies and companies that develop electric car technology on Stash.

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The company, based in Palo Alto, California, has been publicly traded on an exchange called the Nasdaq since 2010.

Following the announcement, the Nasdaq halted trading of the company’s shares. (It then resumed trading less than two hours later.)

Musk has proposed making existing shareholders partial owners in the newly-private company by setting up a fund that would hold their shares. He has also floated the idea of buying shares at $420—about 20% higher than its current share price—which would value Tesla at $72 billion, according to the Wall Street Journal.

So what does all this mean?

What happens when a company goes private?

It’s the opposite of when a company goes public, or has an initial public offering. (That’s when a private company lists on a public exchange, such as the New York Stock Exchange or Nasdaq.)

Companies generally go private when another company makes a bid for the company’s shares. Executives of the company might also make a decision to take the company private, and buy the outstanding stock from shareholders.

When a company goes private, its shares are delisted from an exchange, which means the public can no longer buy and sell the stock. The company may offer existing investors a price for their shares that may be above the current level.

Why would Tesla go private?

Private companies don’t have the same level of scrutiny that public companies do.

When companies are public, they must file quarterly earnings reports with the Securities and Exchange Commission (SEC). These reports are filled with details about the company’s profit (or lack of it), revenue, debts, and changes to management, among many other details.

Private companies are not required to file these reports.

In recent years, for example, Tesla has been widely criticized for burning through hundreds of millions of dollars in cash and missing production deadlines, which has been widely broadcast following its earnings reports.

By going private, a company can often avoid regulatory scrutiny and the need to make public filings about its hits and misses. And that appears to be at least one motivation for Musk’s hope to go private. In a letter to shareholders Tuesday, Musk wrote:

“Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term.”

Good to know

It’s important to realize that many executives who intend to take their companies private often don’t, according to Financial Industry Regulatory Authority (FINRA). Announcements about going private can often boost a company’s share price temporarily, according to FINRA.

Tesla’s stock increased about 10% following Musk’s announcement, when the stock resumed trading, according to reports.

Have other companies gone private?

Yes, recent examples include computer maker Dell, ketchup manufacturer H.J. Heinz, and the supermarket chain Safeway.

The post Elon Musk May Take Tesla Private: What Does That Mean? appeared first on Stash Learn.

They’re a wonder of technology—pistons, gears, valves and wheels, streaming along highways and roads all over the world. For many, cars mean freedom, and the ability to pursue work and travel far from home. Cars also mean convenience. Need groceries ten miles away? No problem.

Cities have grown larger because of them, as residents have moved 20 miles or more from from urban centers–and the suburbs couldn’t exist without them. Numerous industries depend on car manufacturing and sales to continue operating—think oil for gasoline, rubber for tires, and plastics for the innumerable components that go into cars.

And let’s not forget the trucking industry, that moves the products consumers depend on from one corner of the country to another, is also an outgrowth of the automobile. In 2017, revenues for this industry alone were three quarters of a trillion dollars.

In fact, from the days that the first Model Ts sped off the assembly line at a Ford factory more than 100 years ago, to today’s electric-powered Teslas, cars have shaped society and the world we live in. They have allowed us a kind of mobility that previous generations could never have imagined.

Cars drive the economy

Certainly car manufacturing and sales are huge economic drivers. There are about 1.5 billion cars on the planet, and that number is expected to grow to 2 billion by 2040. In 2017, some 88 million cars sold worldwide, and nearly a quarter of those were sold in the U.S. alone.

In the U.S., automobile manufacturing and sales contribute up to 3.5 percent of the U.S. economy, according to research. As an industry, they are the biggest manufacturing and retail segments combined, employing close to 2 million people who either work directly for the big manufacturers, or for companies selling parts and manufacturing components as suppliers, not to mention sale of the vehicles themselves.

Furthermore, workers in the industry earn some $500 billion annually, according to industry research.

The so-called Big Three automakers in the U.S. are Chrysler, Ford, and General Motors. These companies were at one point the largest manufacturers in the world. Today, they are still critical to the economy, but in recent years have been joined by foreign auto manufacturers including Honda and Toyota, which employ some 100,000 workers in the U.S., in addition to their workers overseas.

Cars and climate change

While cars are a huge part of the economy, they’ve taken a physical toll on the planet. Cars contribute to the warming of the earth’s atmosphere, dumping billions of tons of carbon into the atmosphere each year.

Auto sales and dealerships are an industry in their own right, contributing up to 2.6% of gross domestic product

The Environmental Protection Agency (EPA) estimates that about one-third of all greenhouse gases are caused by cars and other forms of transportation that use petroleum fuel. And traffic-related deaths—about 1.3 million people annually die from car accidents around the world—are also a significant concern.

Car makers are aware of the problems, and they are innovating at a fast and furious pace, with manufacturers focusing on making automobiles that are more energy efficient, safer, and—soon—driverless.

Additionally, fuel efficiency has increased over the years, and cars now average about 25 miles to the gallon, an increase of nearly 30% from 2004, according to the U.S. Environmental Protection Agency.

And all of the major car companies now have electric models or hybrids whose motors switch between gas and electric.  As much as five percent of all sales will be for all-electric vehicles in the next ten years, according to recent research.

The future of the car industry

Meanwhile, car companies are some of the biggest innovators around. Whether it’s coming up with the first idea for a moving assembly line more than a century ago, to today’s “just in time” template that conserves time and resources by producing what’s needed only when it’s necessary.

Manufacturers including Chrysler, Ford, General Motors and Tesla are working on the next generation of automobiles. They are using the latest technology, including computer software, high-power lithium-ion batteries, radar, cameras and even lasers to ensure cars run more efficiently, use fewer resources, and keep people safe.

Good to know: Airbags, which were at one time controversial, have saved an estimated 45,000 lives since they were first introduced in 1987, according to the National Highway Traffic Safety Administration.

Collectively, these companies know they must respond to challenges ahead.

Some day soon, driverless cars may become the norm. That could mean having a fleet of shared cars circling neighborhoods, ready to take you grocery shopping, or safely home after a big night out.

“My guess is that in probably 10 years it will be very unusual for cars to be built that are not fully autonomous,” Elon Musk, the founder and chief executive of Tesla said recently at a summit of world leaders.

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