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Tesla Shares Set New High Ahead of TSLA S&P 500 Inclusion

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by Benjamin Godfrey · 3 min read
Tesla Shares Set New High Ahead of TSLA S&P 500 Inclusion
Photo: Depositphotos

Tesla stock closed at $695 on Friday which shows a 5.96% growth.

The shares of electric auto behemoth Tesla Inc (NASDAQ: TSLA) has recorded new highs as index funds accumulate the shares ahead of its listing on the S&P 500 Index (INDEXSP:.IXP) on Monday, December 21. As noted by Investors.com, the plans to add Tesla shares to the S&P 500 will be done at once, as against the norm of adding similarly weighted stocks in succession, and the inclusion will force index funds that models the S&P 500 to buy up about $80 billion worth of Tesla shares.

The buying pressure has sent Tesla stock to a close of $695 on Friday representing a 5.96% growth. This new closing price is a new record for the automaker whose valuation is estimated to be worth much more than nine of the world’s largest automakers per an earlier Coinspeaker report. However, it’s worth mentioning that the stock lost 2.59% of its value after hours.

Tesla stock currently holds the record as the best performing stock on the Nasdaq Composite (INDEXNASDAQ: .IXIC) on Friday with over 200 worth of shares bought up, the company’s highest since February and its fifth-ever largest volume since it made its public listing debut back in 2010.

A lot of hype now surrounds the scheduled inclusion of Tesla to the S&P 500 with a clear division seen amongst Wall Street veterans with respect to the future of the stock post addition. While analysts from Morgan Stanley (NYSE: MS) are bullish on the stock, the likes of JPMorgan Chase & Co (NYSE: JPM) believe that Tesla’s growth is overbloated and is not sustainable in the longer term.

Bernstein analyst Toni Sacconaghi noted that there is usually a “strong precedence” for gains for stocks before their S&P inclusion and after the announcement as seen in the case of Tesla, but a very limited precedent for near-term outperformance after the inclusion. Sacconaghi said this with reference to the 50 largest additions to the S&P500 index since 2010.

Tesla Inclusion in the S&P 500 Complemented by Its New Credit Rating

As Tesla prepares to displace Apartment Income REIT Corp (NYSE: AIRC) from the S&P 500, it now also walks into a new reality spun by a new credit rating from the S&P Global Rating unit. Per the new rating, the S&P Global Ratings revised Tesla’s standing to Investment Grade with the BB tag, from the previous BB. 

Tesla earned this revised rating due to the presence of enough liquidity on its balance sheet, more than enough to offset any of its liabilities and to fund its expansion projects in Europe and Asia.

“As a result, Tesla’s net debt is essentially zero,” the rating agency noted. “Based on a key credit metric, debt to EBITDA, our assessment of financial risk has reduced substantially. With more cash on its balance sheet than debt, the company appears easily able to fund its global expansion in China and Europe, and broaden its U.S. manufacturing base by opening a facility in Austin, Texas. Moreover, this cushion of cash will help the company navigate through the ongoing economic impact from the resurgence of COVID-19.”

This year, Tesla stock has surged by 731% and now has four more ratings to go from attaining the S&P Global Ratings perfect AAA.

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Benjamin Godfrey

Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.

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