Shares of Tesla (NasdaqGS:TSLA) rallied on Monday, lifting exchange-traded funds tied to the consumer discretionary sector as the electric vehicle maker sought shareholder approval for a stock split.

Monday, the Consumer Discretionary SPDR (NYSEArca: XLY) increased by 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 rose 7.8%. TSLA represents 19.1% of XLY, 13.4% of FDIS and 13.3% of VCR.

Shares of Tesla jumped on Monday after the company announced it would seek shareholder approval at its annual meeting for an increase in the number of shares to allow for a stock split, but the electric vehicle maker did not specify when a split would occur or at what ratio, the Wall Street Journal reports.

Although stock splits 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 increase in a company’s stock price, as many believe that the cheaper share price after a stock split can help retail investors invest more money. money in company stock.

The latest stock split decision comes nearly two years after Tesla conducted a 5-for-1 stock split. At the time, the company said it had made the decision “to return the stock ownership more accessible to employees and investors”.

Tesla saw a surge in 2021 as the company reported strong earnings and vehicle deliveries surged despite global supply chain issues that have plagued the auto industry.

However, Tesla’s share price has fallen this year amid a broad pullback in growth-linked stocks in response to the Federal Reserve’s tighter policy outlook to fight inflation. Additionally, growth stocks were hurt by the geopolitical risk aversion sell-off following Russia’s invasion of Ukraine.

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