AP Photo / Susan Walsh
Despite Tesla’s meteoric rise to the ninth largest publicly traded company founded in the United States, it is still not included in the S&P 500 benchmark.
The S&P 500 tracks the 500 largest publicly traded corporations in the United States, as measured by market capitalization.
If included in the S&P 500, Tesla would likely gain more than 1% weight in the index, in comparative market capitalization and the weight of Johnson & Johnson’s S&P 500.
“There is no precedent for adding such a gigantic percentage of new equity to the index,” Datatrek co-founder Nicholas Colas said in a note published Monday.
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What the inclusion of Tesla in the index would mean for the volatility of the S&P 500 has yet to be resolved, and it is conceivable that adding Tesla to the index could cause stocks to sell off in the short term, as the index will have to sell. other members of the S&P 500 down to fund Tesla’s stake, Colas said.
Colas explained that Tesla’s profitability basically comes from the sale of regulatory auto loans, which is the sale of credits to other automakers that do not meet state or federal needs for the sale of zero-emission vehicles.
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Regulatory loan sales translate into direct benefits for Tesla, as there are no prices associated with them. Therefore, the business has been successful more recently, it has not been driven by its underlying business of generating and promoting electric vehicles.
“This puts the S&P committee in charge of adding names to the 500 in a real stalemate, because if through the letter of its ‘law’ Tesla qualifies for inclusion, this is due exclusively to regulatory arbitrage,” Colas said. Array added that “even a slight drop in demand” can push Tesla “back into the red. “
Tesla was down 1. 5% at 11:50 a. m. and it’s up 377% since the beginning of the year.
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