Tesla (NasdaqGS: TSLA) shares rallied on Monday, lifting consumer discretionary sector-related exchange traded funds as the electric vehicle maker requested shareholder approval for a stock split.
On Monday, the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) rose 1.9%, the Vanguard Consumer Discretionary (NYSEArca: VCR) gained 1.3%, and the Fidelity MSCI Consumer Discretionary Index (NYSEArca: FDIS) was up 1.5%.
Meanwhile, Tesla shares advanced 7.8%. TSLA makes up 19.1% of XLY, 13.4% of FDIS, and 13.3% of VCR.
Tesla stocks jumped on Monday after the company said it would request shareholder approval at its annual meeting for an increase in the number of shares to enable a stock split, but the EV maker did not specify when a split would take place or at what ratio, the Wall Street Journal reports.
While stock splits will change the stock price, the total value of the company and an investor’s holdings remain the same. Stock splits have historically generated a short-term boost in a company’s stock price, as many believe that the cheaper share price after a stock split can help retail investors put more money into the company stocks.
The latest decision for a share split comes almost two years after Tesla made a 5-for-1 stock split. At the time, the company stated it made the move “to make stock ownership more accessible to employees and investors.”
Tesla has enjoyed a strong surge in 2021 as the company announced strong profits and vehicle deliveries were sharply higher despite global supply chain problems that impeded the automobile industry.
However, Tesla’s share price has retreated this year amidst a broad pullback in growth-related stocks in response to the Federal Reserve’s tighter policy outlook to clamp down on inflation. Additionally, growth stocks took a hit after the geopolitical risk-off selling following Russia’s invasion in to Ukraine.
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