(This story is only for CNBC Pro subscribers ) Tesla shares are rallying in premarket trading Wednesday on the heels of the electric car maker's plan to split its equity five for one later this month. And that's left some analysts scratching their heads. Stock splits do not impact the existing ownership of a company and do not change anything about the fundamental health of the company. In fact — in the modern age of fractional trading where investors can buy portions of single shares — the long-term impact of a company's decision to split its stock is increasingly negligible. So with Tesla equity up 7% before the opening bell, some sell-side analysts ventured to explain why the stock is seeing such strength. Baird's Ben Kallo and David Katter, for example, said that the overnight jump "is indicative of investors electing to purchase stocks which are positioned to benefit from the current upgrade cycle for technology around transportation, renewable energy, and the software enabling both." "The company indicated the split was motivated by a desire to make ownership more accessible for employees and investors," they wrote. "We believe the stock split is a recognition of the fact that the market is increasingly influenced by individual investors, including those looking to gain exposure to next-generation transportation." Tesla announced its five-for-one split Tuesday evening with the new shares in effect on August 31. Apple announced a similar split earlier this year. Others, such as Deutsche Bank's Emmanuel Rosner, echoed the Baird analysis. He wrote in a note to clients that even though splits don't mean anything about the quality of a company, Tesla's move may still make it easier for retail investors to snap up a stock they believe in. "While stock splits don't create value per se, and institutional investors are typically largely indifferent to them, Tesla's stock price reacted very positively yesterday after the market close," he wrote. "This is likely because Tesla has a very large retail investor following, and the stock split essentially lowers the bar for small investors." Shares of Tesla have more than tripled so far this year, up 228.54% since the end of 2019. The stock's most-recent rally came after Tesla's second-quarter earnings , when it reported its fourth straight quarter of profits. The results qualified the stock to join the S & P 500. But even if the move makes Tesla's stock more affordable to some retail investors, those stakeholders represent just a tiny portion of ownership compared to the major investment institutions that dominate the public U.S. markets. Vanguard, BlackRock and State Street, three of the world's largest investment companies, own almost 9% of Tesla. That may be why other brokerages, such as Evercore ISI, struck a more dubious tone in their assessment of the split. "Stock splits [are] traditionally more targeted for retail investors which we know TSLA has plenty," analysts Chris McNally and John Saager wrote. "Splits (for retail) should have even less of an impact in the future (vs historical) given fractional shares now widely available." "AAPL's recent run since [its] split announcement likely to be used by bulls as 'proxy' for potential short-term 'TSLA pop,'" they added.
