Four Days of Free-Fall Mania. Dream goes up in smoke. Passed over by Etsy, Teradyne, and Catalent.
By Wolf Richter for WOLF STREET.
After regular trading hours on Friday, S&P Dow Jones Indices announced which companies would join the S&P 500 Index, and Tesla, tragically, wasn’t on the list. In response in after-hours trading, Tesla shares plunged 7% to $387.
Shares are now down 25% in four days of trading from the after-hours peak on Monday, August 31, in a sort of free-fall mania. Monday was the first day of trading after the stock split, a moment of triumph engraved into the Internet with my Triple-WTF Chart of the Year, showing shares reaching the tip of the spike at $514.74 a share after-hours, after having annihilated my WTF-Chart of the Year of February 4 and my Double-WTF Chart of the Year of July 1 (stock prices via YCharts):
S&P Dow Jones Indices announced in its press release that three companies will be added to the S&P 500 Index (Etsy, Teradyne and Catalent) and three companies would be kicked off (H&R Block, Coty, and Kohl’s). The changes will be effective in the morning of September 21.
Tesla not making it into the S&P 500 is a major tragedy for fans of the stock, for whom that induction was an unquestionable certainty, and one of the rational and indisputable foundations of why the company should be worth three times as much as Toyota, or ten times or whatever, though Tesla has a global market share in the auto industry of less than 1%.
The press release didn’t say why Tesla wasn’t included in the S&P 500. One of the minimum requirements is that a company make a profit on a GAAP basis for four quarters in a row.
Tesla accomplished that by hook or crook with its Q2 earnings report, on stagnating revenues, and $428 million in “regulatory credits,” in the quarter, and $782 million in “regulatory credits” in the first half. Without these “regulatory credits,” Tesla’s GAAP earnings would have been deep in the red both quarters this year.
So surely, for fans of the stock who thought that shares would quintuple over the next three months based on the inclusion in the S&P 500 Index, this is just another minor setback on the way to Mars.
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