Welcome to Tesla Motors Club
Discuss Tesla's Model S, Model 3, Model X, Model Y, Cybertruck, Roadster and More.
Register

Impact of upgrade to investment grade

This site may earn commission on affiliate links.
Hello,

Many are waiting for the Moody’s and S&P to upgrade Tesla to investment grade. It might be a substantial catalyzer for the share price.

Since the rating would be mostly advisory to mutual fund, pension fund, it is important to understand the institutional ownership at present. I made the following table showing the top 11 largest companies by market cap (data from fintel.io).

Compared with AAPL, TSLA is 0.339 of its market cap, but the institution owned value is only 0.278 of AAPL, indicating substantially less appreciated by institutions than by retail investors (like us) and founders (like Musk). The blue column indicates TSLA is actually the most underappreciated stock by these funds. Of course, the number of ETFs and mutuals suggest the same.

Assuming funds start to compensate this by buying shares after the credit upgrade, and assuming they accumulate 0.339 institution ownership, the same as they own AAPL. It means they need to purchase $113 billion dollars of TSLA, or 122 million shares, which is 12% of current market cap. Recall that the buying was about 108 million share when TSLA was included to S&P 500.



How will this affect TSLA share price?

1660201331710.png
 

Attachments

  • institution.png
    institution.png
    635.1 KB · Views: 102
Hello,

Many are waiting for the Moody’s and S&P to upgrade Tesla to investment grade. It might be a substantial catalyzer for the share price.

Since the rating would be mostly advisory to mutual fund, pension fund, it is important to understand the institutional ownership at present. I made the following table showing the top 11 largest companies by market cap (data from fintel.io).

Compared with AAPL, TSLA is 0.339 of its market cap, but the institution owned value is only 0.278 of AAPL, indicating substantially less appreciated by institutions than by retail investors (like us) and founders (like Musk). The blue column indicates TSLA is actually the most underappreciated stock by these funds. Of course, the number of ETFs and mutuals suggest the same.

Assuming funds start to compensate this by buying shares after the credit upgrade, and assuming they accumulate 0.339 institution ownership, the same as they own AAPL. It means they need to purchase $113 billion dollars of TSLA, or 122 million shares, which is 12% of current market cap. Recall that the buying was about 108 million share when TSLA was included to S&P 500.



How will this affect TSLA share price?

View attachment 839515
Best case scenario we rally hard, medium case scenario the buying is drawn out over a long period of time and creates good protection against dips. (In the sense that institutions would buy the dip whenever they could), worst case there is nearly no impact.

However, we thought the S&P inclusion price was a solid floor but we broke below that a few times since then, so there are no guarantees.

From my limited knowledge on the matter, I glance that investment grade means certain institutions are now allowed to purchase Tesla bonds. I don't think they are forced to.

Therefore I don't expect a sudden rally/squeeze. Just generally more buying interest in TSLA, gradually bringing us to a higher price range. What price range? Sorry, I left my crystall ball at home.

Will be sweet if this coincides with Twitter overhang being removed and Q3 ER, that's for sure :).