Shall TSLA be added to S&P500? (out of main)

[Ocelot]

Am looking to buy some more. Just unsure when. I think everything is pointing towards a tough quarter, with decrease pricing, and decrease wait times. So the question is do we eek out net profit this quarter. If we do, and are added to the S and P500 i thiink stock goes up regardless. If not I think stock goes down.

So wondering, anybody think we see a net income this quarter?

 

[heltok]

I think Q2 will be the quarter when it finally happens. A small profit and S&P 500 inclusion. My reasoning:

1. I think Tesla wants to get into S&P500 now so they can raise capital and expand faster with new battery cell manufacturing, cybertruck etc. So they will pull strings to get profitable if they can
2. Troy, who has a history of being pessimistic early but get closer towards the end of the quarter is guessing 81k deliveries:
https://twitter.com/TroyTeslike/status/1268753695442903045
Compare this to 88.5k deliveries in Q1 which was profitable even with lots of cars in transit:
https://ir.tesla.com/static-files/c1723af4-ffda-4881-ae12-b6f3c972b795
3. Freemont was down a lot during the quarter, saving expenses compared to Q1
4. Shanghai Model 3 likely has higher margins than Freemont Model 3
5. Some sold Y which likely had higher trims than average in Q1
6. Likely continous cost savings as we have seen all previous years

1-6: I think Tesla will squeeze out a profit, numbers will look totally weird compared to Q1 but all in all should end up about the same. But I am far from certain, covid-19 shutdown is adding a lot of uncertainty to any model, could be off by +-$1B.

 

[Buckminster]

I think Q2 will be the quarter when it finally happens. A small profit and S&P 500 inclusion. My reasoning:

1. I think Tesla wants to get into S&P500 now so they can raise capital and expand faster with new battery cell manufacturing, cybertruck etc. So they will pull strings to get profitable if they can
2. Troy, who has a history of being pessimistic early but get closer towards the end of the quarter is guessing 81k deliveries:
https://twitter.com/TroyTeslike/status/1268753695442903045
Compare this to 88.5k deliveries in Q1 which was profitable even with lots of cars in transit:
https://ir.tesla.com/static-files/c1723af4-ffda-4881-ae12-b6f3c972b795
3. Freemont was down a lot during the quarter, saving expenses compared to Q1
4. Shanghai Model 3 likely has higher margins than Freemont Model 3
5. Some sold Y which likely had higher trims than average in Q1
6. Likely continous cost savings as we have seen all previous years

1-6: I think Tesla will squeeze out a profit, numbers will look totally weird compared to Q1 but all in all should end up about the same. But I am far from certain, covid-19 shutdown is adding a lot of uncertainty to any model, could be off by +-$1B.

I would love for you to be right. I just don't see it. I am positioned for a squeeze anytime but will be leveraging my LEAPS in time for Q3 inclusion.

 

[azaz]

With the recent news that Tesla may be looking at 90k deliveries, this looks more likely than ever

 

[Buckminster]

@Fact Checking or not, great thread:
https://twitter.com/truth_tesla/status/1277321864101138433

 

[LN1_Casey]

Soooooooo....

Yes.

 

[azaz]

I think there’s a second price surge that happens before earnings and post official profit announcement

 

[jackbowers]

Ran some numbers. At Tesla's current valuation, if the Standard & Poor's index committee decides to add it to the S&P 500, it would debut as one of the top 20 stocks in the index with a weighting of nearly 1%. Assuming that there's roughly $3 trillion directly indexed to the S&P 500 and perhaps $400 billion linked to the Extended Market Index (which Tesla would be exiting with a 3.5% weight), net flows into Tesla from index funds could be in the range of $10-15 billion. Unless the S&P Index Committee bends its rules, that would happen over a 5-day period.

Most short-sellers will likely avoid the stock until this event is over, as it could move higher as the market anticipates the index committee to announce its inclusion. But on the day that Tesla is officially part of the S&P 500 index, the upside liquidity pressures will ease, and the shorts will be all over it, with the possibility of a large decline that erases most of the anticipated runup.

 

[ggr]

Ran some numbers. At Tesla's current valuation, if the Standard & Poor's index committee decides to add it to the S&P 500, it would debut as one of the top 20 stocks in the index with a weighting of nearly 1%. Assuming that there's roughly $3 trillion directly indexed to the S&P 500 and perhaps $400 billion linked to the Extended Market Index (which Tesla would be exiting with a 3.5% weight), net flows into Tesla from index funds could be in the range of $10-15 billion. Unless the S&P Index Committee bends its rules, that would happen over a 5-day period.

Most short-sellers will likely avoid the stock until this event is over, as it could move higher as the market anticipates the index committee to announce its inclusion. But on the day that Tesla is officially part of the S&P 500 index, the upside liquidity pressures will ease, and the shorts will be all over it, with the possibility of a large decline that erases most of the anticipated runup.

Can you clarify a bit about the "Extended Market Index" please? I've never heard of it, and a DuckDuckGo search shows many different meanings for it. If you meant the S&P 400 Midcap index, most companies go through that to get to the S&P500, but Tesla never qualified for that either.

 

[Buckminster]

The following are some of the forces that will cause an inclusion spike:

• S&P 500 ETFs - already covered in detail (most are forced to buy)
• Shorts covering
• Option owners deleveraging (I will sell LEAPS and buy shares)
• Rising share price will make it more expensive - ETFs might all delay purchase to the final moments hoping it will come down
• New funds and investors buying ahead of inclusion (S&P500 inclusion speculators)
• Momentum traders buying in
• New funds and investors buying post ER following positive P/E ratio

I'm sure there are more - anyone?

 

[Mardak]

Can you clarify a bit about the "Extended Market Index" please?

There's a number of funds that "complete" the US total market especially useful for those who have access to funds that follow S&P 500. I.e., these funds are all US companies except those in S&P 500.

Here's one example: Vanguard ETF Profile | Vanguard

As of yesterday, VXF has 4.58% weighting in TSLA while the next closest (Square) is at 0.88%.

 

[Buckminster]

That 'pre-split' estimate of 26 M shares needed by Index Funds was based on the old TSLA Market Cap.

Since S&P 500 components are weighted by their Mkt Cap, you can muliply those 26M shares by 1.75x now to get the current likely weight if TSLA were included at this share price. That's about 46M shares.

This Cap Raise of $5B doesn't begin to touch that, and what's more, the way its structured it allows the SP to continue to go up daily, as Tesla agrees to a minimum sale price.

Didn't @Fact Checking call this the 'Infinity Squeeze'?

HODLing.

I think it's just as likely this is a quickie Cap raise to help the MMs out of the bind they're in over the next 2 days while they scramble to buy the shares they are obligated to provide to their "beneficial Owners".

I think there'll be more to come once S&P time comes around: this slightly unusual Cap raise sets the precedent for that and allows the S&P Committee to finally make their announcement.

All while Tesla benefits handily. This cash could not go to a better cause than Tesla's business plan thru 2025.

Let's ROLL!

Cheers!

The main difference with previous cap raises is that this one is specifically aimed at softening the squeeze after S&P 500 inclusion. The recent run up is partly caused by the expectation of such a squeeze. How much dampening effect the extra shares will have on the squeeze remains to be seen, and the perception of this effect will likely determine where SP is headed in the coming few days. If the general opinion is that it will only take the edge off, we will probably go up. If the general opinion is that it will prevent a squeeze, we will likely go down.

 

[Buckminster]

I found this page on the S&P site regarding methodology. Near the bottom are a bunch of spreadsheets, one of which is the rebalancing calendar for equity indexes. Here's a snapshot:

View attachment 583673

If I'm reading that right, the actual file with the new balances for the 9/18 rebalancing is sent to SPG's customers after the close on 9/4. I assume any related additions/removals would be announced at the same time.

Note that announcements related to the previous rebalancing (6/19) were made on 6/12, the date listed for the proforma file in that calendar. Note also that both the June and December windows are one week between proforma and effective dates, but the window for September is two weeks.

Announcement tomorrow???!!!

View attachment 583762

 

[Oil4AsphaultOnly]

Announcement tomorrow???!!!

Nope, friday, the 4th. after hours.

 

[Buckminster]

Nope, friday, the 4th. after hours.

It will actually be today for those in Canberra in just 2 hours!

 

[Oil4AsphaultOnly]

It will actually be today for those in Canberra in just 2 hours!

I see. sorry I missed the "/s" from your previous post. And if you weren't trying to be funny ... "5:15pm Eastern Time".

 

[Robocop]

I keep hearing that today, the 4th, will NOT be announcement day because we have a 3 day weekend in the US (holiday). Is there any precedent to this logic? Like does S&P avoid making announcements prior to a holiday? Seems at odds with the fact they they announce 1. After Hours. and 2. often on Fridays (which of course are followed by two non-trading days). I just don't see Monday's holiday as a relevant deterrent. AND the actual rebalancing day is fast-approaching.

Is there a precedent for announcing on Tues the 8th, only 10 days before the rebalance? I just really feel like today is the day, as everything else makes less sense.

 

[hershey101]

No inclusion.... now how quickly do we go back down?

 

[Mengy]

No inclusion.... now how quickly do we go back down?

Good question. I'm considering selling some of my shares Tuesday morning and buying back in a few days later after it drops some.

But then it might not drop all that much either?

Good question.

 

[traxila]

Good question. I'm considering selling some of my shares Tuesday morning and buying back in a few days later after it drops some.

But then it might not drop all that much either?

Good question.

Usually, stock specific market moving events like this are discounted immediately. For example, if a pharma gets a bad decision on a drug, the price drop is all but done in two minutes, assuming the company has fundamentals that allow it to continue operations.

Big Players had three hours to clean out positions if all they were around for was the S and P. TSLA already down from a brief high of around 540. We got a thirty point drop after this lack of inclusion. There was support at 390.

Fundamentals of company improve on almost daily basis. Battery day coming. P and D results for blowout quarter to follow.

And the truth is no one really knows what the S and P will do. They could issue a PR any day.

SP moves are always a hard call and this one seems to be harder than usual. Obviously for long term holders this is immaterial. For traders....could well be that downside is not significant from here. I would fear continued weakness in macros more than the S and P. QQQs continuing correction will definitely bring down TSLA as well.

Did TSLA get where it was because of S and P? It was in the mid 200s and sliding when the split announcement came. Seemed that people had given up on S and P at that point.

Anyway, all the best and Good Luck.