Tesla overlooked for S&P 500, stock tumbles by around one-fifth

September 09, 2020

SP Dow Jones Indices, the owner of the SP 500 index, wiped $80 billion off the market value of electric car-maker Tesla Inc on Tuesday, when it excluded the company from the stock market index of US’s 500 largest companies.

Tesla’s shares closed the day 21.06% lower, its worst loss since it began trading a decade ago. The company was expected to join the index after posting four consecutive quarters of profit — the requirement for inclusion in the market which for years had eluded the investment-heavy carmaker with low sales and production volumes.

However, the sudden slide in Tesla’s prices could also be seen as readjustment after a meteoric few months during the economic upheaval caused by the coronavirus. Tesla’s shares had risen in value more than five-fold between mid-March and the end of August during an extremely volatile period for the US economy and its markets.

Tesla’s slide also coincided with a sentiment in tech stocks in general taking a hit. Apple closed 6.7% lower on Tuesday, while Microsoft was down by 5.4%.

Read more: Teutonic Tesla: Elon Musk’s busy week in Germany

Tesla falls as Nikola rises

Meanwhile, another US electric car-maker named after the Serbian-American scientist behind alternating current, Nikola Corp, reported a 40% jump in its shares on Tuesday, on the back of a $2 billion manufacturing deal with General Motors (GM). GM also announced the purchase of an 11% stake in Tesla’s competitor as part of the deal. Nikola is one of comparatively few companies seeking to manufacture larger electric trucks, also using hydrogen fuel cell technologies.

Surprise SP inclusions

Etsy Inc, an online retailer, Teradyne Inc, which specializes in automatic test equipment mainly for electronics, and Catalent Inc, a pharmaceutical technology company, were the surprise choices over Tesla for inclusion in the SP 500.

Read more: What German Gigafactory neighbors make of Tesla’s Elon Musk

Dan Levy, an analyst with Credit Suisse, told Reuters that the company, founded by billionaire Elon Musk, may have been excluded as there were challenges in adding a company of Tesla’s size to the index.

Tesla’s market capitalization stands at $390 billion, almost 10 times more than the market capitalization of Etsy, Teradyne and Catalent combined.

Coronavirus’ top winners: From Netflix to Tesla

In top gear

Tesla has emerged as the most valuable automaker amid the pandemic, eclipsing Toyota and Volkswagen, despite selling only a fraction of cars sold by the traditional behemoths. Tesla shares rose more than 100% in the second quarter during which the carmaker’s sales topped estimates thanks to a rapid ramp-up in production at its Shanghai plant, which remained largely unaffected by the pandemic.

Coronavirus’ top winners: From Netflix to Tesla

Netflix and chill

Netflix has added more than 25 million subscribers in the first six months of the year as lockdowns forced people to stay homebound. The streaming platform has gained $70 billion (€61 billion) in market capitalization this year, making it more valuable than media giants such as Walt Disney, ATT, the parent of HBO, and Comcast, owner of NBC and Universal Studios.

Coronavirus’ top winners: From Netflix to Tesla

Ditch your gym

The fitness startup Peloton, which makes exercise bikes and also offers online fitness classes, saw its sales jump 66% in its third quarter as stay-at-home orders and coronavirus fears prompted many fitness enthusiasts to ditch their gyms and opt for the company’s offerings. In April, Peloton held its largest class ever with more than 23,000 people attending it from home.

Coronavirus’ top winners: From Netflix to Tesla

Coronovirus billionaires

Moderna Chief Executive Stephane Bancel (R) briefly became a billionaire after the company shipped an experimental coronavirus vaccine for clinical testing in humans, boosting its share price, Bloomberg reported. Malaysia’s Lim Wee Chai (L), who owns a majority stake in medical gloves maker Top Glove, also entered the billionaire’s club amid the outbreak.

Coronavirus’ top winners: From Netflix to Tesla

Stay home, stay connected

Few companies have been so talked about during the past few months as teleconferencing firm Zoom. At its peak, the company attracted more than 300 million participants on some days in April, up from 10 million in December, despite some PR troubles around privacy and security issues. The company’s market cap has zoomed past $70 billion, up from around $16 billion at the time of its IPO last year.

Coronavirus’ top winners: From Netflix to Tesla

Gaming gains

Gaming provided a perfect escape for millions stuck at home. Online games such as Call of Duty attracted tens of millions of players. The latest game, Nintendo’s popular Animal Crossing franchise, sold more than 13 million units within six weeks of its launch in March. Nintendo’s Switch and other consoles such as Xbox and PlayStation have seen demand soar over the past few months.

Coronavirus’ top winners: From Netflix to Tesla

Streaming to glory

The Swedish music streaming firm saw its paid subscribers base surge to 130 million in the first quarter amid coronavirus lockdowns. The company saw usage on video game consoles such as Xbox and PlayStation soar during the period. Spotify’s US-listed shares are among the top performers so far this year.

Coronavirus’ top winners: From Netflix to Tesla

Stay-at-home stocks

The pandemic has boosted stay-at-home stocks such as Apple, Microsoft, Amazon and Facebook — companies whose offerings facilitate online communication, remote working and transactions. These companies have been the main drivers of US indices over the past few months. Companies like Paypal and cloud-computing firm Twilio have also surged in the past months.

Coronavirus’ top winners: From Netflix to Tesla

Empty shelves

Retailers such as Germany’s Rewe and France’s Carrefour saw food items fly off their shelves during the initial days of the pandemic as panicking shoppers stock up their pantries. The rush at the supermarkets prompted investors to lap up shares of packaged food companies. Online retailers like Amazon are also seeing strong demand as virus-spooked shoppers avoid brick-and-mortar stores.

Coronavirus’ top winners: From Netflix to Tesla

Safety first

Makers of face masks, hand sanitizers and sanitary wipes are witnessing a huge surge in demand as shoppers around the world seek ways to protect themselves against the rapidly spreading virus. 3M Corp, which makes face masks among other things, is one of the biggest beneficiaries.

Author: Ashutosh Pandey