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Tesla drops 4.5% in first day of trading on the S&P 500 index

More than $150 billion worth of Tesla shares traded on Friday, ahead of the index inclusion.
Image: Chris Ratcliffe/Bloomberg

Tesla shares fell 4.5% in premarket trading on Monday as the electric vehicle maker marks its trading debut on the S&P 500 Index.

Its shares have catapulted 731% this year in anticipation of the historic inclusion, making it the biggest company ever to be added to the benchmark. The EV pioneer will also be joining the S&P 100, replacing oil and gas firm Occidental Petroleum Corp., which fell 7.5% premarket.

“Welcome to the S&P 500 Club,” said Wedbush analyst Daniel Ives in a report. The index addition marks a “defining chapter of success” for the company he said.

Futures contracts on the S&P 500 were trading down 0.5%, following European stocks lower after several major countries moved to suspend travel from the UK amid concerns about a new strain of Covid-19.

Traders who spent most of the year pushing up shares of Tesla in anticipation of surging demand from index funds saw its climax Friday, as frantic purchases by passive managers drove the shares up almost 5% as exchanges closed. At the end of the day, Tesla shares closed at an all-time high. More than $150 billion worth of Tesla shares traded on Friday, ahead of the index inclusion.

“There is strong precedence for positive returns for stocks prior to S&P 500 inclusion and post announcement, but very limited precedent for near term out performance post inclusion,” Sanford C. Bernstein analyst Toni Sacconaghi wrote in a note earlier this month.

Market strategists have been divided on how the addition of the famously volatile stock would impact the benchmark gauge. According to Susquehanna quantitative derivative strategist Souhow Yao, the inclusion will have a limited impact on implied volatility, and that if Tesla was added a month ago, volatility for the S&P 500 would have actually decreased.

On the other hand, Interactive Brokers’ Chief Strategist Steve Sosnick said Tesla’s historic volatility suggests daily moves of about 4% up or down, and at its current market value can end up budging the index by about 2 points.

© 2020 Bloomberg

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Much as I like the idea of non-air polluting petrol or diesel vehicles, they all operated on electricity which gets produced somewhere and stored or channelled to charger stations.

So how is the production of THIS electricity any better for climate change issues than the the current production from oil or coal or perhaps nuclear? Wind and solar are nowhere near able to fill this need.

There is no such thing as a free lunch so is it better to have some vast clean electricity production plant rather than smarter petrol technology or even hydrogen power?

I haven’t posted on here in a while, since the comment section has now basically become the old News24 comment section, but let me give you a stab at your question since it does seem sincere.

It is true that a electric car’s carbon footprint will be greatly influenced by the carbon footprint of the power grid supplying it with power.
The good news is : Wind, Solar, Hydro, Geothermal, Nuclear and even Natural gas all produce less CO2 per MWh than coal does and since a electric motor is about 90% efficient, about 90% of the electrical energy is converted to kinetic energy.
Contrast that with internal combustion engine cars that have motor efficiencies somewhere in the 30% range, so only about 30% of the potential energy in a liter of fuel is converted to kenitic energy.

Fossil fuels are also quickly falling out of favor around the world (except in the countries where people are dumb enough to be closing nuclear plants > Looking at you Germany)

ICE cars are also basically at their limit of engineering, we have spent almost a century perfecting them, and we have made major strides, go the the motor museum in Franshoek and see how little power old 6.5L V8 engines made.

To answer the other part of your question, the beauty of going electric is that unlike a fuel like Hydrogen you don’t need to build big refueling stations (or pipelines) to move your hydrogen like you would current fossil fuels, the capex involved in building charger stations is a fraction of what it is to build a petrol / diesel or hydrogen station.
I still expect Hydrogen to play a massive part in electricity production and transport, but not at the consumer level, it will be at industrial scale : Trucks, Trains, Ocean freighters etc

Yes it is a sincere question because in my lifetime of 73 years I’ve been very aware of the impact of fossil fuels on the global environment and although non-fossil fuels are surging in Germany and perhaps Scandinavia, fossil fuels are still very well entrenched.

And being the cynic that I am I don’t see carbon credits as anything other than a PR exercise. Oil and coal make up 60% of global energy input and clean energy, like hydroelectric and renewables only 11% with natural gas 24% Nuclear is only 4%. We also have to remember the huge entrenched political and financial systems involved in the production and distribution of oil and coal.

I’m sceptical of the PR industry moving the EV industry and as anyone with a basic knowledge of physics knows the first law states: “The first law, also known as Law of Conservation of Energy, states that energy cannot be created or destroyed in an isolated system.”

My personal thinking on future energy is that more sophisticated, lighter batteries will evolve and storage from solar will become far more efficient to power them. It’s still the cheapest source and one has to wonder why, if the human brain is so sophisticated, that it took us thousands of years of digging in the earth for energy when it was beating on our backs at the same time.

https://www.forbes.com/sites/rrapier/2020/06/20/bp-review-new-highs-in-global-energy-consumption-and-carbon-emissions-in-2019/?sh=420c06bb66a1

End of comments.

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