Tesla investors should be watching for M&A for S&P inclusion

Tesla investors should be watching for M&A for S&P inclusion

Tesla Inc investors were disappointed after the company was snubbed in the S&P 500's latest round of inclusions, but the electric automaker's entry could still happen at any time and a merger by others in the benchmark index might help, Trend reports with reference to Reuters.

Merger activity within the S&P 500 has historically been the biggest reason companies leave the index, and could provide an opening for a company like Tesla, said two sources familiar with how the committee has made decisions.

While some in the market have questioned the quality of Tesla’s earnings, it was still widely expected to gain entry to the benchmark.

“It will go into the S&P. There’s no way it cannot at some point,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. “Maybe it’s in the penalty box right now while they just assess the situation.”

While Tesla’s valuation “seems absolutely crazy” the company cannot be ignored, he added.

A spokesman for S&P declined to comment. Tesla did not immediately respond to requests for comment.

Picking which companies make it in the S&P 500 is part science, part art. There are formal criteria a company is expected to meet, around things like profitability, share float and market capitalization, but the index committee has leeway in deciding who makes the cut.

The S&P 500’s aim is not to beat the market, but to emulate the performance of its 11 sectors, as well the 156 sub-industries within those sectors.

Tesla, as an automaker, is part of the consumer discretionary sector, which currently has an 11.4% weighting in the index. That sector also includes companies like retailers, home builders and restaurants.

The index committee aims to pick the companies that best represent their industries, while keeping the weighting of the sector in check against the others, which include information technology, health care, and financials, so the index’s performance matches that of the overall market, one source said.

Mergers among companies in the index give committee members - the names of whom S&P does not make public - additional opportunities to readjust weightings based on the ever-changing dynamic of the market.

Tesla’s shares, for instance, have skyrocketted more than 300% this year, making it the world’s most valuable automaker, and changing the entire sector’s footprint. Since the S&P’s latest index decision, Tesla stock is down more than 10%.

When Tesla in July reported its fourth-straight quarterly profit, one condition for S&P 500 entry, many investors believed it was destined for admission, helping fuel the rally in the company’s shares.

But Tesla was not on the list of new additions announced Sept. 4 ahead of the index’s quarterly rebalancing on Sept. 18.

The committee’s decision “can only have come from a collective and committed view that (Tesla) is profoundly over-valued and sits on shakier fundamentals than its mega market cap indicates,” said DataTrek Research co-founder Nicholas Colas.

Still, he said he was “surprised” Tesla was not admitted.

The omission came as Tesla’s latest earnings showed the sale of emissions credits to other carmakers helped make up for losses in its core autos business.

At any moment there are 25 to 50 companies that technically qualify to be in the index, but are not in, and a handful of those are companies the committee agrees are acceptable candidates when discussed in its monthly meetings, one source said.

With a big name like Tesla, it is tempting to look for a big exit from the index, the person said, adding that the committee tracks announced mergers, which are opportunities to make unscheduled additions.

Subscribe to Trend in Google News! Subscribe
Georgia simplifies travel regulations for Azerbaijan
Georgia simplifies travel regulations for Azerbaijan
EAC states lose 92 pct tourism earnings due to COVID-19 pandemic
EAC states lose 92 pct tourism earnings due to COVID-19 pandemic
Minister makes forecast for recovery of Georgia's tourism sector
Minister makes forecast for recovery of Georgia's tourism sector
Loading Bars
Latest
Covaxin instilled self-confidence: ICMR chief
India: Adani Ports to shun cargo from Afghanistan, Pakistan, Iran
U.S. readies plan to vaccinate kids ages 5-11 against COVID-19
Chronicles of Victory: President Ilham Aliyev interviewed by Japan’s Nikkei newspaper on October 21, 2020 (PHOTO/VIDEO)
Chronicles of Victory: October 21, 2020
Trilateral meeting of Deputy PMs of Azerbaijan, Armenia and Russia held in Moscow
First VP Mehriban Aliyeva shares footages from her visit to liberated Zangilan with President Ilham Aliyev (VIDEO)
Kazakh and Russian PMs hold talks
SOCAR AQS, Naftogaz ink MoU for dev’t of onshore, offshore technologies
President Ilham Aliyev: After a long break - 27 years of Armenian occupation, Zangilan returned to its homeland
Mikheil Saakashvili charged with illegal border crossing
Plan initiated to prosecute int'l companies for illegal exploitation of Vejnali gold deposit - president
Modern transport and logistics center, and necessary infrastructure to be created in Zangilan - President Aliyev
Iran's Energy Exchange announces products to be on sale on October 23
Certain contracts signed in Iran on manufacturing of spare car parts
Recent events on opening of Zangazur corridor show that we achieving our goals - Azerbaijani president
Azerbaijan strengthened its army, economy, international positions - President Aliyev
This is our common victory, victory of Azerbaijani people - President Aliyev
Azerbaijan to try resettle people in Zangilan by early next, maybe by late this year - President Aliyev
Turkey unveils number of ships received at local ports in September
Leading private Uzbek banks in terms of deposits
Funds allocated to draw up master plan for liberated Zangilan city
Leading Uzbek banks with state share in terms of deposits
David Babayan on private visit in Moscow - Azerbaijani Embassy in Russia
Iran`s TEDPIX drops on Wednesday
Azerbaijan reveals latest data on loan portfolio of local banks
Azerbaijani FM, US Assistant Secretary of State hold phone talks
Uzbek Central bank publishes list of leading non-state banks in terms of loans
EBRD keen to create base of integrated supply chains in "Seaport Aktau" SEZ
Kazakhstan launches polymetallic processing plant in Karaganda region
Azerbaijan raises metallurgical production
Leading Uzbek banks with state share in terms of loans
Britain's Lloyds Bank to close another 48 branches
Nasdaq profit beats on robust demand for investment products
Geely and Volvo's Lynk & Co set to expand to Gulf region in Q4 2021
Azerbaijani President Ilham Aliyev and First Lady Mehriban Aliyeva meet with public representatives of Zangilan
Coronavirus situation in Russia becoming complicated — Putin
Dynamics of Azerbaijan’s electricity generation by 2025
President Ilham Aliyev and First Lady Mehriban Aliyeva take part in opening of Zangilan substation
Azerbaijani president, first lady attend groundbreaking ceremony for digital substation in Zangilan
President Ilham Aliyev and First Lady Mehriban Aliyeva view conditions in military unit of State Border Guard Service in Zangilan district
Azerbaijani president, First lady view process of construction of International Airport in Zangilan
Azerbaijani President Ilham Aliyev and First Lady Mehriban Aliyeva view work done under "smart village" project in Aghali village
Waze: Traffic on Israel's roads 23% higher than pre-Covid
Azerbaijan's trade turnover with CIS countries grows in 9M2021
Iran unveils amount of money saved through domestic production
Azerbaijan announces increase in petrochemicals production for 9M2021
Azerbaijan records growth in agricultural production
“Azercell volunteers” brought joy to thousands of families over the past year
India to discuss IPR waiver on Covid vaccines, global trade issues during WTO DG’s 3-day
Nar continues to support the biggest Azerbaijani audiobook library
Azerbaijani President Ilham Aliyev and First Lady Mehriban Aliyeva visit Zangilan district (FOTO)
Number of TEU containers loaded/unloaded in western ports of Iran’s Hormozgan Province up
Iran’s Bahar Azadi gold coin price again falling
SOCAR in Georgia looking for crossover vehicles through operating lease
Iran bans local companies from entering Karabakh illegally
Gita Gopinath to leave IMF, return to Harvard University in January
India's total Covid-19 vaccinations cross 99-crore mark
Iran to re-enable issuing tourist visas
Iran reveals COVID-19 data for October 20
AccessBank to consider possibility of increasing its capital by end-2021
AccessBank projects slight increase in cost of manat resources
Georgia's knitwear exports to Turkey increase
Azerbaijan shares data on number of vaccinated citizens
Azerbaijan to reduce oil production in 2022, says IMF
Georgia’s trade turnover with Turkey increases
Azerbaijan confirms 2,303 more COVID-19 cases, 1,010 recoveries
Iran sees increase in exports to Turkmenistan
IMF expects Azerbaijan’s gas output, export to rise in 2022
Saudi energy minister sees demand from gas-to-oil switch at up to 600,000 bpd
Azerbaijan boosts production of building materials
NATO is committed to Georgia’s Euro-Atlantic aspirations - Special Representative
Kremlin says direct contacts with Taliban needed to comprehend developments in Afghanistan
Baker Hughes posts Q3 profit as drilling demand returns
Bulgaria seeks grant financing for gas storage expansion
Turkmenistan joins "Turkic.World" project
Turkmenistan, Turkish 'RÖNESANS Holding' discuss further co-op in construction sector
Iran’s PMO implementing plans on shipbuilding
Azerbaijan's oil exports to Turkey for 9M2021 revealed
Turkmenistan preparing to take part in UN Climate Change Conference
Iran allocates more bank advances to various sectors of economy
Shipping Association of Iran talks cargo transportation to China
Azerbaijan to complete construction of Khudaferin, Giz Galasi HPPs in several years
Iran looks to expand oil ties with Venezuela
300 km of overhead, cable lines laid in Azerbaijan’s liberated territories - minister
Azerbaijan plans to fully provide liberated territories with electricity by end-2021
Iran eyes increasing investment in renewable energy
Iran’s East Oil & Gas Production Company increases extraction
Azerbaijan’s 9M2021 oil export to India revealed
Kazakhstan announces date of moving from external deficit to surplus zone
Azerbaijan cuts food imports
Azerbaijan purchases de-mining equipment from Croatia – Azerbaijani FM
Honey from Azerbaijan's liberated Kalbajar, Lachin delivered to Baku fair (PHOTO)
Kazakh Parliament approves bill "On state budget for 2022-2024"
Azerbaijan - strategic partner of Croatia, FM Gordan Grlić-Radman says
Iran boosts exports of metal products
Armenia must take effective steps to open communications – Azerbaijani FM
Russia records over 34,000 COVID-19 cases in past 24 hours
Croatian companies may partake in restoration of Azerbaijan's liberated areas
Azerbaijan discloses volume of chemical products output for 9M2021
All news