Changes to S&P Index - Tesla did not make it

[NW-Bound]

Just saw this on the Web:

S&P Global announced changes to the Index Friday evening. Going into the S&P 500 are Teradyne (TER), Etsy (ETSY) and Catalent (CTLT). Leaving are H&R Block (HRB), Coty (COTY) and Kohl’s (KSS).

No mention of Tesla.

See: https://www.barrons.com/articles/te...hers-did-51599255574?siteid=yhoof2&yptr=yahoo

 

[Mr. Tightwad]

I think ERD50, Aja, and Old Shooter are in charge of S&P Global

 

[NW-Bound]

I think ERD50, Aja, and Old Shooter are in charge of S&P Global

Dang! And they probably have been busy shorting it.

Dang! They did not tell me. Thought they were my friends. I have never shorted any stock in my life, but for a sure play I would want to go in too.


PS. A bunch of insiders have been unloading Tesla stocks, such as one member of the board of directors of Tesla, and a younger brother of Musk, plus another major shareholder. Their timing was perfect too. Sold at the recent high. Darn! Maybe they have inside info from S&P.

 

[aja8888]

I think ERD50, Aja, and Old Shooter are in charge of S&P Global

I'm retired and have no affiliation with anything. Kind of like a stale donut.

I like EV's and have stated I would have one when they become affordable (on my scale of value). But actually, I would rather have another Corvette!

 

[NW-Bound]

Aja, it was a joke!

I like EVs too, but that has nothing to do with what I think about the valuation of the companies in this sector.

I always thought that the valuation of Tesla stock was insane, as are nearly all other stocks in this sector. On Monday 8/31/2020 when both Apple and Tesla stock splits were enacted and Tesla share price jumped more than 12%, I was so tempted to short Tesla.

As mentioned, I do not short stock because of the saying by John Keynes. “The markets can remain irrational longer than you can remain solvent.”

A safer play would be to buy some puts. And I did look at the price of puts on Tesla, and they were very expensive. So, I walked away.

Now that the S&P committee decision is made public, what will happen next?

Inclusion in the S&P 500 index is at the discretion of the committee, which does not disclose its reason. Prior to this announcement, I have read an observer's opinion that the committee might be troubled by the fact that without the regulatory credit sales, Tesla does not have a positive net income. It is not a sure thing that the company can maintain this in the future. Additionally, the volatility of the stock price is not viewed favorably, as it would impart the same gyration to the index.

At this point, it will be even more interesting to watch the stock price to see what happens next. The Web will be buzzing with more articles about the company.

Again, the insiders did very well by unloading their shares at just the right time. They are no fools.

 

[Christine]

Last year there were several changes in the S&P during September. On different days and weeks during the month. So it's possible there will be more than one change this September too.


If Tesla will be included I have no idea. But index funds will have missed the run up in TSLA since June.

PS. A bunch of insiders have been unloading Tesla stocks, such as one member of the board of directors of Tesla, and a younger brother of Musk, plus another major shareholder. Their timing was perfect too. Sold at the recent high. Darn! Maybe they have inside info from S&P.

Elons younger brother Kimbal followed plans set in stone half a year ago so no magic behind the timing. Isn't that often the case for company board members and key employees? That their stock options follow rigid rules for when to buy and sell?

 

[OldShooter]

I think ERD50, Aja, and Old Shooter are in charge of S&P Global

Thanks, but no credit due here.

I watch this stuff with the same sort of detachment that I have when a restaurant's televisions are silently showing various groups of people running around with different kinds of balls. There's too much movement to avoid watching a little bit but I have no interest in the outcome of the game. Actually Tesla is/was a pretty small thing compared to spectator events like the nifty fifty, the tech excitement, and the housing bubble.

 

[OldShooter]

... Isn't that often the case for company board members and key employees? That their stock options follow rigid rules for when to buy and sell?

You may be thinking of planned sales per Rule 10b5-1: https://www.investopedia.com/terms/r/rule-10b5-1.asp

 

[Christine]

You may be thinking of planned sales per Rule 10b5-1: https://www.investopedia.com/terms/r/rule-10b5-1.asp

Thank you - there it is.

 

[NW-Bound]

Yes, it is true that the younger Musk and the other Tesla director stock sale followed a plan that was set back in Feb 2020. The timing with respect to the stock rise/drop was simply fortuitous. In contrast, the sale by the large shareholder, an outside fund, was deliberate and intended to reduce their holding while taking advantage of the high price.

About funds missing the 5x stock rise this year up to this point, even Musk could not imagine that traders would bid his stock up so high. I remember a "Wow" tweet relating to this.

Tesla's chance of survival is indeed looking better than it did last year. At some point, it will be added to the S&P. The selection committee is perhaps waiting for the mania to die out and the price to stabilize for a while.


PS. Tesla issued some new shares earlier this year, after the stock price had gone up some. The sale raised $2 billion for the company coffer. It is said that had they waited till now, the same number of shares would have raised $5 billion. And Tesla is looking to issue some new shares soon for $5 billion.