Tesla Falls After S&P Early Listing Illusory, Stocks

Sat, 09/05/2020 – 8:52 am

[NEW YORK] Shares of Tesla Inc. fell as much as 8 percent in post-trade trading on Friday, as investors who contributed to its astonishing rally this year by anticipating that it could join the S&P 500 index will have to wait another day.

Electric vehicle maker Elon Musk was expected to be added to the prestigious benchmark after posting a fourth consecutive quarterly profit in July, clearing the last major hurdle for consideration by S&P Dow Jones Indices, which monitors the indicator.

Some, including Credit Suisse analyst Dan Levy, said the move could be announced on Friday so that the stock will begin trading as a component of S&P this month, though he added there was no guarantee a decision was imminent.

In its place, online retailer Etsy Inc., semiconductor equipment maker Teradyne Inc., and medical technology firm Catalent were added, replacing H&R Block Inc., Coty Inc., and Kohl’s Corp.

Etsy was up 4.8% post-market, Teradyne was up 3% and Catalent was up 3.6% on the news.

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S&P Dow Jones Indices, which oversees the index, rebalances it quarterly, but its components may change more frequently, spokesman Ray McConville said by phone Friday. “The index committee can make changes to the index at any time,” he said.

The index’s decision not to include Tesla, at least not for now, may have been based on questions about the automaker’s “profitability metrics” and the murky forecast for the full year, Dan Ives, an analyst at Wedbush Securities with a “neutral” rating on the shares. wrote in an investigative note on Friday.

“The failure of Tesla to enter the S&P 500 will be a head scratch for the bulls who saw this as practically a lockdown given that all parameters were met,” he wrote.

Joining the S&P 500 greatly expands a company’s investor base as it is included in index tracking funds that control more than $ 11 trillion in assets. But skeptics have pointed out that simply meeting the inclusion criteria does not guarantee being added to the blue chip index.

Tesla is up 400 percent this year, twice the gain of top-performing stocks in the S&P 500. The stock closed 2.8 percent higher in regular trading on Friday, after falling as low as 8, 6 percent earlier in regular Friday trading.

They fell 18 percent in the previous three days, fueled by news that the company’s second-largest shareholder cut its stake, as well as Tesla’s plan to sell up to $ 5 billion in stock.

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