hey guys it's sasha tesla just published an 8k form with the sec this morning indicating that they are planning to do a stock split this is big news in more ways than just the obvious so i will explain exactly what this means the timelines implications and share some insight on what else's tesla is doing that makes the stocks but even more interesting so in the early hours of today tesla filed this with the sec it says on march 28 2022 tesla announced its plan to request stockholder approval at the upcoming 2022 annual meeting of stockholders for an increase in the number of authorized shares of common stock through an amendment to the company's amended and restated certificate of incorporation in order to enable a stock split of the company's common stock in the form of a stock dividend tesla's board of directors have approved the management proposal but the stock dividend will be contingent on the final board approval the company's definitive proxy statement relating to the annual meeting will include additional details regarding the amendment as well as the record date date and location of the annual meeting so tesla is saying in normal english that they have decided to do a stock split and they will seek stockholder approval at the annual meeting this year and they will publish the full details in the run-up to that annual meeting so when is the annual meeting in 2022 well we don't have a firm date yet in 2021 it was held on october 7th not that long ago the first major company event that happened in giga texas in 2020 the annual meeting was held on september 22nd the same day the tesla held its battery day when they were making announcements about the 4680 sales the 2019 annual meeting though took place on june 11th so for the last couple of years that meeting has been happening later on in the year but then again before 2020 all of tesla's annual meetings took place at the beginning of juneau right at the end of may usually in that first week or two of june and usually invites are sent out for that meeting in early april so given that we are at the end of march and given this filing that was made just to the sec i am guessing that perhaps tesla is going to go back to that early june timeline although it is still possible that we're going to be having to wait until october and november the shift in 2020 and 2021 did have factors like covet and alignment with other major company events to blame so i personally think that perhaps the june timeline is more likely so what exactly are these authorized shares because the proposal here is not talking about a stock split yet it's saying the tesla will increase the number of authorized shares authorized shares is a technical term that doesn't really have that much to do with the dynamics of a stock it is the maximum number of shares that a company is permitted to ever have under its own statute so if a company has a hundred authorized shares but only 40 total shares out there in circulation they could technically go and issue another 60 to for example raise capital the problem becomes when a company wants to do a stock split because the way stock split happens it's not quite how many people think it happens it's not like each share actually gets divided that's the way that we talk about it instead a corporate action takes place that issues a dividend to each shareholder and that dividend instead of being cash instead of being paid cash comes in the form of more shares so ten to one stock split like this for example each share will get awarded nine shares so if you have 40 shares out in the market uh if you do that then your total number after the stock split would be 400 once that dividend was issued and that will be more than the 100 that you have authorized as your maximum total so in that case you would have to increase the number of authorized shares to let you do that now currently tesla have 2.1 billion shares authorized where 100 million can be preferred stock and 2 billion can be common stock the sort of shares that regular investors like you and me can buy in the stock market and there are about 1.1 billion shares of tesla out in circulation so you can see that even a two-for-one stock split would not currently be possible without increasing that authorized total in fact the 2.1 billion that is authorized has been the same number since tesla did their ipo in 2010. when they last did a five to one stock split two years ago they didn't actually need to increase the authorized share total because even after multiplying the total number of shares by five they were still within that total cap and this is why this announcement is different to what you would normally hear with the stock split a company will usually go and announce that stock split without needing to do this shareholder vote or to wait the vote is only needed because it amends the core company data from the certificate of incorporation and it is in this certificate of incorporation in article 4 clause 4.2 that states the number of authorized shares prefer stock of common stock may be increased or decreased but not below the number of shares they're often outstanding by the affirmative vote of the holders of a majority in voting power of the stock of the corporation entitled to vote generally in the election of directors blah blah blah so unfortunately we don't have any indication yet as to exactly how big a stock split we're looking at just now because anything over two for one would require this process to happen previous rumors suggested maybe another five to one split but there is every chance that tesla will follow the other mega caps and send its share price into the hundred dollar something range by doing a ten to one split instead now technically a stock split by itself means very little it doesn't affect the company fundamentals or anything at all about the business investors do get very excited though because some reason people like more shares at a lower price for the same total even though it changes absolutely nothing but there are a few things that a stock split does help with and does indicate and this is the important bit now first off a lower share price helps options traders because option contracts trade in multiples of 100. so when you go and buy an option contract you're trading 100 shares of the stock instead of just one and you can see how when the share price is a thousand dollars one option is suddenly trading volumes of a hundred thousand dollars not something that will significantly affect massive institutional investors but definitely makes an impact on the trading capability of smaller traders so if you're gonna do a ten to one splits and the option contract now represents ten thousand dollars that's going to facilitate more trading and generally speaking that won't have any long-term impact on the share price but it will add volatility and it can also be a catalyst for pushing the share price around more consistently on good or bad short-term outlook but perhaps the biggest positive indicator that a stock split announcement gives is the management's confidence in the company's long-term future now that isn't saying a lot in terms of specifics but people inside the company will have an infinitely greater understanding of where the company is headed and the progress of some of its key projects and if they are pushing for a stock split the indicator there is that they believe that the share price is going to increase substantially from here new employees being hired into the company will also often receive share based compensation and the lower share price makes share options a lot easier towards staff members especially below the very senior management level and with tesla hiring a huge number of people over the coming months into the two new factories that may also be a factor now coincidentally or perhaps not so coincidentally elon musk in an interview to business insider two days ago said that he expects the tesla robot optimus to have a prototype later this year and even potentially start a limited production run at the end of next year and as global supply chains ease over the next few months and years tesla's energy business is also likely to finally pick up speed with deployments as well however as with all elon timelines if you have been following elon and tesla for some time take the dates that he gives with a giant dollop of salt because in translation a prototype later this year and a production model next year probably really means we're about four to five years out in the real world now i am pretty sure when the robot does arrive it probably won't be quite as capable as perhaps elon wants it to be i certainly do not expect it to be able to store brain data but tesla's car production is going to ramp very fast over the next two three years and that probably is one of the big contributing factors to the reason for the stock split fremont is currently being upgraded and already has a 500 000 per year capacity shanghai is being upgraded from the 850 000 current capacity to about 1.2 million plus we have unconfirmed reports that the second identical factory building is going to be built very soon next to the existing one berlin's phase one will have a target annual capacity of 500 000 or they're about at full pace although the shanghai example where the target was also considerably less than what they're currently producing indicates this could be a conservative estimate austin also has the first phase going live in the next few days reportedly but that is also another 500 000 or so but even just these plans alone without anything else without any future expansions already add up to 3.9 million cars per year which is crazy add another three phases to berlin and austin because their plots are huge and they have the capacity and whatever they're saying i think those phases will come over the coming years it's not going to be immediate but suddenly that 3.9 million figure goes up to more like 6.9 million cars per year and suddenly tesla's total production volume without even building new factory sites is right up there with the biggest in the world except their margins and additional revenue through software sales are orders of magnitude higher than the incumbent car companies but in november last year elon musk said that tesla will announce more new factory sites later this year technically i guess it could be more factory sites in shanghai and additional phases but the way it was frey sounded a little bit more optimistic than that and then a few days ago elon said that tesla wants to grow faster than it is at the moment in his words he wants to scale to extreme size so when you juxtapose all of that rhetoric and information with the stock split just being announced it all begins making a whole lot of sense and sounding pretty good for tesla shareholders and i am one so perhaps i am a little bit biased i'm sorry about that if you want further details about tesla's and elon's recent announcements and exactly what they mean for tesla stock please check this video right here if you found this video useful please don't forget to smash the like button for the youtube algorithm and thank you so much for watching i'll see you guys later you.