8 ms·

Tesla set to join S&P 500

56 points by xoxoy 6y ago

marc__1 6y ago
Tesla Inc. (NASD:TSLA) will be added to the S&P 500 effective prior to the open of trading on Monday, December 21 to coincide with the December quarterly rebalance Due to the large size of the addition, S&P Dow Jones Indices is seeking feedback through a consultation to the investment community to determine if T esla should be added all at once on the rebalance effective date or in two separate tranches ending on the rebalance effective date
- colechristensen 6y ago
  There’s the big question, how does the TSLA addition not trigger a huge selloff? ETFs and other mechanisms tied to the index will be selling a whole lot of stock to buy TSLA.
  - thoughtstheseus 6y ago
    Why would they sell stock? You can buy shares with cash and you can source cash many ways.
    - colechristensen 6y ago
      Many ETFs (SPY being the biggest example), funds, other indices, etc. etc. etc. have legal fiduciary obligations to track the S&P 500 index. SPX is market cap weighted, bigger companies get a bigger piece of the pie than smaller ones. TSLA will be entering near the top. Just SPY has ~$320 billion under management. If the rebalance were to happen today (to my best quick calculation), TSLA would make up 1.2% of the S&P 500 index. Just the SPY fund would have to buy just under $4 billion dollars of TSLA stock (more than 1% of the total shares) and sell an equal amount of the rest of their portfolio. Many many other funds would have to do the same. We're talking about tens of billions of dollars of stock sell orders. >Why would they sell stock? You can buy shares with cash and you can source cash many ways. The various funds are obligated to allocate their managed assets to match the index weighting. We're not talking about a small fund, but a significant portion of the entire market reallocating assets.
      - quickthrowman 6y ago
        I know of a guy that owns 20% of TSLA that will use this liquidity event to unload some shares. You can count on it, I’m sure his creditors are!
  - pmiller2 6y ago
    Not all ETFs that track an index actually hold every component of the index. They do it by holding representative securities that correlate well with the movements of the index, and supplementing with derivatives when necessary.
    - colechristensen 6y ago
      This is the short version of the SPY prospectus: >The investment seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500® Index. The Trust seeks to achieve its investment objective by holding a portfolio of the common stocks that are included in the index (the “Portfolio”), with the weight of each stock in the Portfolio substantially corresponding to the weight of such stock in the index. Commodity and leveraged ETFs play games with futures and options to achieve goals, I'm not aware of any significant index focused ETFs that don't achieve their tracking goals without mostly holding common stock. Even if they're holding derivatives instead, it's just a layer of indirection and has substantially the same effect as portfolio rebalancing.
  - ThrustVectoring 6y ago
    There's a trade hedge funds can make that's the exact opposite of the expected rebalance from the passive funds. The expected size of that trade and the passive funds trade isn't something you can predict in advance. If too many hedge funds try to front-run the rebalance and buy to cover into the expected selloff, it could go the exact opposite way. It's really hard to make money in the stock market from extremely public information.
mrnobody_67 6y ago
Either way, ouch: https://www.plainsite.org/realitycheck/tesla.html https://www.plainsite.org/realitycheck/tesla.html
- xiphias2 6y ago
  Why ouch? How is this TSLAQ site relevant?
- gutino 6y ago
  xD. Are working for a short seller?
- wongarsu 6y ago
  At least the executive summary is mostly about how Tesla's products are bad and their financials are bad. The market disagrees on both counts.
- sjwright 6y ago
  Links to this kind of low quality, evidence-free junk is not worthy of Hacker News. All the claims made are just beyond absurd and desperate in their ridiculousness. This is exactly what you'd expect from a company that is demolishing the net worth of many short sellers.
  - mrnobody_67 6y ago
    What claims are absurd? Tens of millions of people will own significant Tesla stock via the index despite obvious evidence of fraud and financial engineering at the company. Even if everything was above board (i.e. the company had a general counsel or was able to obtain a D&O policy from someone other than Elon Musk himself)... this is probably the most overpriced car company on the planet by any metric, and it's revenue has flat-lined the last 8 quarters (no, it's not a growth stock).
- ralph84 6y ago
  > Its market capitalization has exceeded $80 billion at its peak Well that aged well
ForHackernews 6y ago
How the hell does Tesla (sales: ~400,000) have a bigger market cap than GM (sales: ~2,000,000)? Is this just the market being irrational and Musk being a good salesman? Is there any reason to think mainstream automakers can't put batteries in their cars? Is there any reason to believe Tesla's self-driving aspirations will pay off (over say, GM Cruise, or Waymo)? I'm sure Tesla is fine and they make a few nice luxury cars, but I feel like I'm going crazy here: How is Tesla worth $380B, but Porsche is worth only 20B?
- EdwinLarkin 6y ago
  Is not it like with Apple that most (all?) of Tesla sales are 100k cars while GM has to compromise and sell a lot of cheap vehicles?
  - skookum 6y ago
    The comparison doesn't really work: Apple makes a healthy margin on their lower sales numbers and has an associated services revenue stream to boot. Tesla loses money on car sales and has managed to squeeze out some positive earnings by selling regulatory credits to their competitors. It's not a "selling less luxury goods but at a higher margin" story. If we assume that the regulatory credit revenue stream eventually dries up then the case for the valuation seems to revolve around Tesla becoming the only car company and/or Tesla being or becoming so much more than just a car company.
    - marc__1 6y ago
      > Tesla loses money on car sales According to Tesla latest results, automotive gross margins were 27.7%, significantly above industry average. > managed to squeeze out some positive earnings by selling regulatory credits Of $7,611 million in quarterly revenues, $397m are regulatory credits. Additionally, one of S&Ps criteria to include a company in the S&P is 4th consecutive quarters of GAAP profits, so I believe that the S&P agrees that Tesla does generate real profits [1] https://tesla-cdn.thron.com/static/4E7BR9_TSLA_Q3_2020_Update_P0Q85U.pdf?xseo=&response-content-disposition=inline%3Bfilename%3D%22TSLA-Q3-2020-Update.pdf%22 https://tesla-cdn.thron.com/static/4E7BR9_TSLA_Q3_2020_Updat...
curious_fella1 6y ago
For the Tesla bears out there, is there a way to invest in the S&P500 - TSLA ?
- SheinhardtWigCo 6y ago
  Buy puts.
  - curious_fella1 6y ago
    More looking for an ETF
    - deleted 6y ago
      [deleted]
    - twirlock 6y ago
      Try spynt. It's SPY except it doesn't force hipsters to feel embarrassed for letting liberal bloggers lie to them about consensus.
    - xoxoy 6y ago
      I’m sure there are broad market Vanguard ETFs out there that won’t have Tesla in it and will make no changes based on this announcement. This is really just ETFs that track S&P 500.
  - redorb 6y ago
    Everyone please be careful buying puts if you're not doing it for insurance against current holdings. If you're buying anywhere outside of the .30 delta and less than 21 days until expiration (even then) you're probably buying a lottery ticket. The average person would be better off buying 10 x $5 scratch off lottery tickets tomorrow and accepting the result... than buying a far out of the money short dated put.
- andrewmcwatters 6y ago
  Per Ray Dalio's "Holy Grail" math, supposedly you'd buy the top 7, 15, or 20 uncorrelated equities from the S&P 500, and capitalization-weight them yourself by hand.
maxharris 6y ago
Six months ago, I tried to explain why I thought Tesla was the right company to put the majority of my life savings into back in March and April of this year (it ended up being 80% of my portfolio by early summer, as I added more shares) @notechback, if you are reading this, what is your opinion of what I was saying now, given the fact that I started buying the stock in March, and wrote those ten points back in April? https://news.ycombinator.com/item?id=22964850 https://news.ycombinator.com/item?id=22964850 My only wish is that I could go back and write my reply to him in a kinder style, but with the same exact substance.
- bob29 6y ago
  is taht why you just repost the same comment on HN over and over again hyping tesla products? Instead of penalizing change, why not encourage it? When you work from home, you don't put anywhere near the carbon into the atmosphere that you would commuting. You also spend a lot less on lunch, and you don't need to put your children into state-run schools that are really there to function as daycare centers as much as they are to educate. If all of that office space in downtown areas stays dark, and the zoning laws are altered or removed, it can be redeveloped into housing that's actually affordable. We really are running into a wall on the methane crisis, and we we simply don't have the time to integrate these changes at a slower pace. Let's focus on changing our regulations that prohibit building neighborhoods for pedestrians. Let's work on getting homes with solar roofs and big batteries. Let's get drone delivery everywhere. Let's electrify the transport system with electric cars, electric trucks, eVTOL aircraft. Let's tunnel underneath and between cities and connect them with hyperloops. Let's connect people in rural areas with low-cost, low-latency satellite internet access. Doing these things will directly provide a great number of jobs for a great number of people. It will make a great number of new jobs possible. It will improve the natural environment. I think this is a much more positive direction to take than to try to slow things down.

56 points by xoxoy 6y ago

Tesla Inc. (NASD:TSLA) will be added to the S&P 500 effective prior to the open of trading on Monday, December 21 to coincide with the December quarterly rebalance Due to the large size of the addition, S&P Dow Jones Indices is seeking feedback through a consultation to the investment community to determine if T esla should be added all at once on the rebalance effective date or in two separate tranches ending on the rebalance effective date

colechristensen 6y ago
There’s the big question, how does the TSLA addition not trigger a huge selloff? ETFs and other mechanisms tied to the index will be selling a whole lot of stock to buy TSLA.
- thoughtstheseus 6y ago
  Why would they sell stock? You can buy shares with cash and you can source cash many ways.
  - colechristensen 6y ago
    Many ETFs (SPY being the biggest example), funds, other indices, etc. etc. etc. have legal fiduciary obligations to track the S&P 500 index. SPX is market cap weighted, bigger companies get a bigger piece of the pie than smaller ones. TSLA will be entering near the top. Just SPY has ~$320 billion under management. If the rebalance were to happen today (to my best quick calculation), TSLA would make up 1.2% of the S&P 500 index. Just the SPY fund would have to buy just under $4 billion dollars of TSLA stock (more than 1% of the total shares) and sell an equal amount of the rest of their portfolio. Many many other funds would have to do the same. We're talking about tens of billions of dollars of stock sell orders. >Why would they sell stock? You can buy shares with cash and you can source cash many ways. The various funds are obligated to allocate their managed assets to match the index weighting. We're not talking about a small fund, but a significant portion of the entire market reallocating assets.
    - quickthrowman 6y ago
      I know of a guy that owns 20% of TSLA that will use this liquidity event to unload some shares. You can count on it, I’m sure his creditors are!
- pmiller2 6y ago
  Not all ETFs that track an index actually hold every component of the index. They do it by holding representative securities that correlate well with the movements of the index, and supplementing with derivatives when necessary.
  - colechristensen 6y ago
    This is the short version of the SPY prospectus: >The investment seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500® Index. The Trust seeks to achieve its investment objective by holding a portfolio of the common stocks that are included in the index (the “Portfolio”), with the weight of each stock in the Portfolio substantially corresponding to the weight of such stock in the index. Commodity and leveraged ETFs play games with futures and options to achieve goals, I'm not aware of any significant index focused ETFs that don't achieve their tracking goals without mostly holding common stock. Even if they're holding derivatives instead, it's just a layer of indirection and has substantially the same effect as portfolio rebalancing.
- ThrustVectoring 6y ago
  There's a trade hedge funds can make that's the exact opposite of the expected rebalance from the passive funds. The expected size of that trade and the passive funds trade isn't something you can predict in advance. If too many hedge funds try to front-run the rebalance and buy to cover into the expected selloff, it could go the exact opposite way. It's really hard to make money in the stock market from extremely public information.

mrnobody_67 6y ago

Either way, ouch: https://www.plainsite.org/realitycheck/tesla.html https://www.plainsite.org/realitycheck/tesla.html

xiphias2 6y ago
Why ouch? How is this TSLAQ site relevant?
gutino 6y ago
xD. Are working for a short seller?
wongarsu 6y ago
At least the executive summary is mostly about how Tesla's products are bad and their financials are bad. The market disagrees on both counts.
sjwright 6y ago
Links to this kind of low quality, evidence-free junk is not worthy of Hacker News. All the claims made are just beyond absurd and desperate in their ridiculousness. This is exactly what you'd expect from a company that is demolishing the net worth of many short sellers.
- mrnobody_67 6y ago
  What claims are absurd? Tens of millions of people will own significant Tesla stock via the index despite obvious evidence of fraud and financial engineering at the company. Even if everything was above board (i.e. the company had a general counsel or was able to obtain a D&O policy from someone other than Elon Musk himself)... this is probably the most overpriced car company on the planet by any metric, and it's revenue has flat-lined the last 8 quarters (no, it's not a growth stock).
ralph84 6y ago
> Its market capitalization has exceeded $80 billion at its peak Well that aged well

ForHackernews 6y ago

How the hell does Tesla (sales: ~400,000) have a bigger market cap than GM (sales: ~2,000,000)? Is this just the market being irrational and Musk being a good salesman? Is there any reason to think mainstream automakers can't put batteries in their cars? Is there any reason to believe Tesla's self-driving aspirations will pay off (over say, GM Cruise, or Waymo)? I'm sure Tesla is fine and they make a few nice luxury cars, but I feel like I'm going crazy here: How is Tesla worth $380B, but Porsche is worth only 20B?

EdwinLarkin 6y ago
Is not it like with Apple that most (all?) of Tesla sales are 100k cars while GM has to compromise and sell a lot of cheap vehicles?
- skookum 6y ago
  The comparison doesn't really work: Apple makes a healthy margin on their lower sales numbers and has an associated services revenue stream to boot. Tesla loses money on car sales and has managed to squeeze out some positive earnings by selling regulatory credits to their competitors. It's not a "selling less luxury goods but at a higher margin" story. If we assume that the regulatory credit revenue stream eventually dries up then the case for the valuation seems to revolve around Tesla becoming the only car company and/or Tesla being or becoming so much more than just a car company.
  - marc__1 6y ago
    > Tesla loses money on car sales According to Tesla latest results, automotive gross margins were 27.7%, significantly above industry average. > managed to squeeze out some positive earnings by selling regulatory credits Of $7,611 million in quarterly revenues, $397m are regulatory credits. Additionally, one of S&Ps criteria to include a company in the S&P is 4th consecutive quarters of GAAP profits, so I believe that the S&P agrees that Tesla does generate real profits [1] https://tesla-cdn.thron.com/static/4E7BR9_TSLA_Q3_2020_Update_P0Q85U.pdf?xseo=&response-content-disposition=inline%3Bfilename%3D%22TSLA-Q3-2020-Update.pdf%22 https://tesla-cdn.thron.com/static/4E7BR9_TSLA_Q3_2020_Updat...

curious_fella1 6y ago

For the Tesla bears out there, is there a way to invest in the S&P500 - TSLA ?

SheinhardtWigCo 6y ago
Buy puts.
- curious_fella1 6y ago
  More looking for an ETF
  - deleted 6y ago
    [deleted]
  - twirlock 6y ago
    Try spynt. It's SPY except it doesn't force hipsters to feel embarrassed for letting liberal bloggers lie to them about consensus.
  - xoxoy 6y ago
    I’m sure there are broad market Vanguard ETFs out there that won’t have Tesla in it and will make no changes based on this announcement. This is really just ETFs that track S&P 500.
- redorb 6y ago
  Everyone please be careful buying puts if you're not doing it for insurance against current holdings. If you're buying anywhere outside of the .30 delta and less than 21 days until expiration (even then) you're probably buying a lottery ticket. The average person would be better off buying 10 x $5 scratch off lottery tickets tomorrow and accepting the result... than buying a far out of the money short dated put.
andrewmcwatters 6y ago
Per Ray Dalio's "Holy Grail" math, supposedly you'd buy the top 7, 15, or 20 uncorrelated equities from the S&P 500, and capitalization-weight them yourself by hand.

maxharris 6y ago

Six months ago, I tried to explain why I thought Tesla was the right company to put the majority of my life savings into back in March and April of this year (it ended up being 80% of my portfolio by early summer, as I added more shares) @notechback, if you are reading this, what is your opinion of what I was saying now, given the fact that I started buying the stock in March, and wrote those ten points back in April? https://news.ycombinator.com/item?id=22964850 https://news.ycombinator.com/item?id=22964850 My only wish is that I could go back and write my reply to him in a kinder style, but with the same exact substance.

bob29 6y ago
is taht why you just repost the same comment on HN over and over again hyping tesla products? Instead of penalizing change, why not encourage it? When you work from home, you don't put anywhere near the carbon into the atmosphere that you would commuting. You also spend a lot less on lunch, and you don't need to put your children into state-run schools that are really there to function as daycare centers as much as they are to educate. If all of that office space in downtown areas stays dark, and the zoning laws are altered or removed, it can be redeveloped into housing that's actually affordable. We really are running into a wall on the methane crisis, and we we simply don't have the time to integrate these changes at a slower pace. Let's focus on changing our regulations that prohibit building neighborhoods for pedestrians. Let's work on getting homes with solar roofs and big batteries. Let's get drone delivery everywhere. Let's electrify the transport system with electric cars, electric trucks, eVTOL aircraft. Let's tunnel underneath and between cities and connect them with hyperloops. Let's connect people in rural areas with low-cost, low-latency satellite internet access. Doing these things will directly provide a great number of jobs for a great number of people. It will make a great number of new jobs possible. It will improve the natural environment. I think this is a much more positive direction to take than to try to slow things down.