If you’ve been following the stock price lately, you might be forgiven if you think Tesla has had a huge cresting of news lately. In fact, on the day my previous article was published, Tesla stock closed at $1500.84. Today, as I write this, the stock price is currently at $2,213.40 per share, right before the split occurs.
While I suppose it could be argued, I feel like the biggest news affecting the price of the stock between those two dates is the upcoming stock split that will be completed Monday, August 31, and that’s what I want to dive into here. Stock splits shouldn’t matter, but I think the market is getting this one right, because Tesla presents a unique situation. So, let’s dive in!
Why Stock Splits Shouldn’t Matter
Before understanding the difference between Tesla and regular stock splits, let’s make sure we are all on the same page about what a stock split does.
A stock split is exactly what it says it is — the company takes a share and splits that into a predetermined number of shares, which are all worth 1/X of the value of the original share (with X being the number of shares they are split into).
Stocks can also reverse split, where a company will combine multiple shares into one, with the new share price being equal to the price of the shares that were combined. Groupon is an example of a company that did this recently, performing a reverse split of 1-for-20, meaning that if you had owned one share — as I happen to, thanks to opening a Robinhood account — you (or I) now own 1/20th of a share.
When these splits occur, nothing else really changes. The value of the company remains the same. Now you just have more shares, or in the case of a reverse split, fewer shares, that combine for the same total amount of cash value. Earnings per share calculations change based on the new amounts, and can be confusing when you are looking at older articles about profit that don’t automatically update, but a stock split doesn’t change any fundamentals about the company. For instance, as before the split, Tesla will still have over $500 million of warranty repair reserves that it could immediately recognize as revenue.
The point is that stock splits really don’t change anything.
I feel it’s also worth pointing out that stock splits are often done by companies that have been gaining in value, while reverse splits tend to occur with companies that are in trouble. Reverse stock splits can be used to try to keep their shares listed on exchanges that have minimum share price rules, as that is important for getting equity investors to actually purchase them. A cynical person could say it also tricks investors into thinking the company has had a boost. I was sort of excited to discover the stock tracker program I use suddenly showed my single share of Groupon way up, and I was wondering what happened. Maybe I should start caring about it.
But standard stock splits have mostly fallen out of favor. The main reason for them is to to make shares seem more affordable to small investors. Today, with a number of the brokerages that target small investors, like Robinhood, offering the ability to purchase fractional shares — or the ability to buy as little as 1/1,000,000th of a share — a number of places have argued that stock splits weren’t interesting any more, and they were mostly for investors to see share prices soaring into the stratosphere.
The market response to Tesla’s announcement has blown a bit of a hole in that argument, and I think there is a really good reason for it.
What’s The Benefit?
While stock splits don’t affect overall company valuation, earnings, losses, or anything else, there is one thing that they do impact — and that’s the ability to vote your shares. Many of the companies that offer fractional shares do not allow fractional shareholders to vote their shares. Robinhood is one of the few that I could find that does allow you to vote, and collates those votes.
In the case of most companies, the ability to vote your shares probably isn’t a big deal. Institutional investors and “retail” investors often see Tesla in wildlydifferentways. Many of us who started diving into Tesla expected to find some positive and negative information. Last October, I wrote an article about why I originally made a small, 8 share investment into Tesla — I felt that it was a risky stock but one that had potential to increase astronomically in the future. That date in October, I identified 11 points where I saw Tesla doing significantly better than most analyses were showing, and as I’ve continued my own analyses, I couldn’t find evidence where I didn’t believe that the company would execute and grow quickly.
While it seems like Wall Street analysts are starting to understand the bull thesis on Tesla — although, I think a lot of them upgrading their price targets is due to herding (worth a future article of it’s own sometime) — you can still find incredibly silly arguments regularly pushed and promoted. There are still many analysts pushing the argument that Tesla is just a car company. There are still articles written claiming that demand doesn’t exist.
If you’ve dug for your own evidence, those arguments fall apart with actual research. Most of the articles I’ve written are me looking at bear theses to see if they’re valid. With companies I invest in, the bears often have decent points. Tesla is the one company I’ve ever held that I haven’t found a single bear argument with which I agree.
This has everything to do with the stock. Shareholders can force companies to allow shareholders to vote on resolutions that can force companies to change the direction of the company or how it’s managed. Carl Icahn and Dan Loeb are two investors known for that.
It isn’t unrealistic to think that Tesla could have an activist shareholder force a vote on something that might drastically change the direction of the company. In the past earnings call, Elon Musk said, “What bugs me the most right now is that our cars are not affordable enough.” Imagine if an activist investor forced Tesla to hold a proxy vote on if the company should reduce the price of its vehicles or make more money. It isn’t hard to envision a world in which the institutions who own the stock but don’t seem to understand it decide to vote for profits over price.
While I think that Tesla would easily survive such a vote — after all, Elon Musk owns around 20% of the outstanding Tesla shares — the more retail investors have access to voting shares, the more likely the company is to be insulated from changes those Wall Street types may think would make the company better.
Conclusion
I was ecstatic when I heard that Tesla would be splitting its shares, for exactly this reason. With how far off Wall Street investors have been about Tesla so far, I feel any potential reduction in the influence of institutional investors who may be swayed by an activist who attempts to have a proxy vote to change the company is a good thing.
While there are no hard numbers out there, it’s believed around 75% of Tesla is owned by institutional investors and Tesla executives. If retail investors make up the missing 25%, ensuring as many of those investors as possible can vote means that, when combined with Tesla executives, the company should be able to continue to execute it’s strategy exactly how it best sees fit, without outside interference.
And that, to me, is worth a premium.
Disclaimer
I am a Tesla [NASDAQ:TSLA] shareholder who has purchased shares within the preceding 12 months. Research I do for articles, including this article, may compel me to increase or decrease stock positions. However, I will not do so within 48 hours after any article is published in which I discuss matters that I feel may materially affect stock price. I do not believe that my voice could or should influence stock price by itself, and I strongly caution anyone against using my work as your sole data point to choose to invest or divest in any company. My articles are my opinion, which was formulated using research based on publicly available data. However, my research or conclusions may be incorrect.
About the Author
Frugal Moogal A businessman first, the Frugal Moogal looks at EVs from the perspective of a business. Having worked in multiple industries and in roles that managed significant money, he believes that the way to convince people that the EV revolution is here is by looking at the vehicles like a business would.
It’s common knowledge that companies don’t hire the most qualified candidates. Employers hire the person they believe will deliver the best value in exchange for their payroll cost.
Since most job seekers know the above, I’m surprised that so few mention their Employee Value Proposition (EVP). Most job seekers list their education, skills, and experience without substantiating them and expect employers to determine whether they can benefit their company; hence, most resumes and LinkedIn profiles are just a list of opinions—borderline platitudes—that are meaningless and, therefore, have no value. Job seekers need to better explain, along with providing evidence, how they’ll contribute to an employer’s success.
Employers don’t hire opinions (read: talk is cheap); they hire results.
You’re not offering anything tangible when you claim:
I’m a great communicator.
I’m detail oriented.
I’m a team player.
Tangible:
“At Global Dynamics, I held quarterly town hall meetings with my 22 sales reps, highlighting our accomplishments, identifying opportunity areas, and recognizing outstanding performers.”
“For eight years, I managed Vandelay Industries IT department, overseeing a staff of 18 and a 12-million-dollar budget while coordinating cross-specialty projects. My strong attention to detail is why I never exceeded budget.”
“While working at Cyberdyne Systems, I was part of the customer service team, consisting of nine of us, striving to improve our response time. Through collaboration and sharing of best practices, we reduced our average response time from 48 to 12 business hours, resulting in a 35% improvement in customer feedback ratings.”
These examples of tangible answers provide employers with what they most want to hear from candidates but rarely do; what value the candidate will bring to the company. Typically, job seekers present their skills, experience, and unsubstantiated opinions and expect recruiters and employers to figure out their value, which is a lazy practice.
Getting hired isn’t based on “I have an MBA in Marketing and Sales,” “I’ve been a web designer for over 15 years,” “I’m young, beautiful and energetic,” blah, blah, blah. Likewise, being rejected isn’t based on “I’m overqualified,” “I’m too old,” “I don’t have enough education,” blah, blah, blah. Getting hired depends entirely on showing employers that you can add value and substance to their company; that you’ll serve a purpose.
When you articulate a solid value offer, the “blah, blah, blah” doesn’t matter. Job seekers focus too much on the “blah, blah, blah,” and when not hired, they say, “It’s not me, it’s…” The biggest mistake I see job seekers make is focusing on the “blah, blah, blah”—their experience and education—believing this is what interests employers. Hiring managers are more interested in whether you can solve the problems the position exists to solve than in your education and experience.
Not impressive: Education
Impressive: A track record of achieving tangible results.
You aren’t who you say you are; you are what you do.
If you want to be somebody who works hard, you have to actually work hard. If you want to be somebody who goes to the gym, you actually have to go to the gym. If you want to be a good friend, spouse, or colleague, you have to actually be a good friend, spouse, or colleague. Actions build reputations, not words.
The biggest challenge job seekers face today is differentiating themselves. To stand out and be memorable, don’t be like most job seekers, someone who’s all talk and no action. Any recruiter or hiring manager will tell you that the job market is heavily populated with job seekers who talk themselves up, talk a “good game” about everything they can “supposedly” do, drop names, etc., but have nothing to show for it.
More than ever, employers want to hear candidates offer a value proposition summarizing what value they bring. If you’re looking for a low-hanging fruit method to differentiate yourself, do what job seekers hardly ever do and make a hard-to-ignore value proposition.
Increase sales: “Based on my experience managing Regina and Saskatoon for PharmaKorp, I’m confident that I can increase BioGen’s sales by no less than 25% in Winnipeg and the surrounding area by the end of 2025.”
Reduce cost: “During my 12 years as Taco Town’s head of purchasing, I renegotiated contracts with key suppliers, resulting in 15% cost savings, saving the company over $450,000 annually. I know I can do the same for The Pasta House.”
Increase customer satisfaction:“During my time at Globex Corporation, I established a systematic feedback mechanism that enabled customers to share their experiences. This led to targeted improvements, increasing our Net Promoter Score by 15 points. I can increase Dunder Mifflin’s net promoter score.”
Save time: “As Zap Delivery’s dispatcher, I implemented advanced routing software that analyzed traffic patterns, reducing average delivery times by 20%. My implementation of this software at Froggy’s Delivery can reduce your delivery times by at least 20%, if not more.”
If you want to achieve job search success as soon as possible, structure your job search with a single thread that’s evident and consistent throughout your résumé, LinkedIn profile, cover letters and especially during interviews; clearly convey what difference you’ll make to the employer.
Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to artoffindingwork@gmail.com.
Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.
The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.
Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.
The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.
The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.
The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.
The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.
Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.
In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.
“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.
As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.
Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.
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