On Friday, Tesla Inc. proposed a 3-to-1 stock split that would help make the company’s share more affordable for the investors. The electric vehicle maker saw recent sell-offs in the market that has prompted this move. The most valuable automaker also announced that Larry Ellison, a co-founder of Oracle Corp, and a friend of Elon Musk, the chief executive of Tesla, will not return as a member of the board after his term comes to an end.
It was revealed that he would not stand for re-election in the upcoming board meeting. It should be noted that he is one of the top investors who have promised to fund the acquisition of Twitter, the social media company, worth $44 billion by Elon Musk.
Tesla Shares Rise
In extended trading, Tesla saw its share rise by 1% on Friday. The Austin, Texas-based company has seen its share price drop by almost 40% since early April, when Musk had revealed his stake in Twitter. Another reason that the stock has suffered is because of the lockdown announced in Shanghai, China due to COVID, as this has had an impact on Tesla’s production.
Voting for the three-to-one stock split proposed by the company will take place on August 4th. If the proposal gets the green light, it would be the first such action by the company since December 2020 when it did a five-to-one split. According to the company, the suggested stock split would give greater flexibility to its employees in managing their equity and retail shareholders would also have greater accessibility to the stock.
Other companies have also split their shares recently, including Amazon.com Inc., Apple Inc. and Alphabet Inc. The company’s fundamentals remain unaffected in a split, but it does give its share price a boost because a wide range of investors can easily own stock in it.
Tesla is also planning on asking its shareholders to vote on reducing the terms of its board of directors from three years to two.
Proposals by Tesla Shareholders
There are corporate-governance items that are included in the proposals put forward by shareholders of Tesla Inc. These include the company’s efforts in preventing racial discrimination and sexual harassment and the employees’ right to make a union. Tesla’s filing had a proposal from a stockholder regarding this matter. It said that a ruling in 2019 was upheld by the National Labor Relations Board last year. As per the ruling, the company had fired an employee illegally because of union organizing efforts. It also said that the chief executive had threatened the workers illegally about unionization.
United Auto Workers (UAW) is a labor union that was invited to Tesla by the CEO back in March for holding a vote at its factory in California. The proposal said that the company did not have any formal policy in this regard and has not demonstrated how it would go about it. The board suggested voting against the proposal, claiming that the company had just increased the base pay and was working on protecting the rights of its employees.