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I am more disappointed about the TSLA situation. Leaving this company out of the SP500 until they were in the top 10 company in market cap. It was a very active

I am more disappointed about the TSLA situation. Leaving this company out of the SP500 until they were in the top 10 company in market cap. It was a very active decision when most people would assume the sp500 is a passive index. [edit] For clarification, TSLA already had 4 quarters of profit in September 2020 matching sp500 profit requirements but was still left out on a very active decision. [1] [1] https://www.bloomberg.com/news/articles/2020-09-04/tesla-falls-after-anticipated-s-p-inclusion-fails-to-materialize https://www.bloomberg.com/news/articles/2020-09-04/tesla-fal...

AlotOfReading 5y ago
Wasn't this the result of the profit criterion, not an active decision?
- NicoJuicy 5y ago
  Correct. To be included in the S&P you need to be average quarterly profitable + your most recent quarter needs to be profitable.
- hartator 5y ago
  TSLA was matching the profit criterion for a while but was left out because it was too dependent on gov incentives. Which is fine but it is an active decision. As they are not making this kind of arbitrage for other companies relying on gov interventions and gov policies as well.
  - stonogo 5y ago
    Which companies?
    - pvarangot 5y ago
      Not OP but maybe the defense contractors? Raytheon, Lockheed, General Dynamics and I think Teledyne are in the S&P 500.
      - stonogo 5y ago
        Could be, but of those only Teledyne runs any real risk of losing profitability status as a result of scheduled ends of government incentives. I'm having a hard time finding out which companies OP could be referring to.
      - ineedasername 5y ago
        Tesla was relying on direct subsidies to customers for purchasing a Tesla. That's a little different than government contracts or massive tax breaks.
- Kranar 5y ago
  The S&P 500 is selected by a committee vote, so every inclusion is an active decision. There are hundreds of large companies excluded from it for arbitrary reasons, including Dell, Snapchat, Square and literally hundreds of others.
  - thaumasiotes 5y ago
    But your grandparent comment isn't complaining about an inclusion. Exclusion is almost always a passive decision, as it was in this case.
  - astrange 5y ago
    Yes, the S&P 500 is an active index. Its ETFs are passive because they only track that index.
CapriciousCptl 5y ago
Nothing worth being upset about here; stocks aren't eligible for inclusion to the S&P500 until they have a trailing 4 quarters of profit.
- Kranar 5y ago
  This is not true, it's a recommendation but it's not a requirement: https://www.spglobal.com/spdji/en/documents/methodologies/methodology-sp-us-indices.pdf https://www.spglobal.com/spdji/en/documents/methodologies/me... At any rate, even if it were a requirement, Tesla satisfied it at the moment that it was excluded.
  - CapriciousCptl 5y ago
    Well, I'm not sure what you think you see or where you see it in that 45-page pdf. The S&P 1500 criteria are, for instance, on page 8 and refute what you're saying. On a quick glance I couldn't find the S&P 500 criteria in that, again, 45-page pdf without a page reference. Or you can look here[1] on page 2. [1] https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-brochure.pdf https://www.spglobal.com/spdji/en/documents/additional-mater...
    - Kranar 5y ago
      >Well, I'm not sure what you think you see or where you see it in that 45-page pdf. It's not my responsibility nor is it even possible to find a reference to a claim that is false. If you claim that X is a requirement, I can't possibly cite a specific page that says "X is not a requirement" because it's not feasible to enumerate all things that are NOT requirements. All I can do is refer you to the list of requirements and ask you to point out which item in that list substantiates your position. That is what I've done by referencing that document which specifies the eligibility criteria and methodology and that's about the most anyone can do since it's generally not possible to prove a negative. Now you mistakenly believe that page 8 substantiates that claim, but it doesn't. What page 8 states is the following: >The sum of the most recent four consecutive quarters’ Generally Accepted Accounting Principles (GAAP) earnings (net income excluding discontinued operations) SHOULD be positive as SHOULD the most recent quarter. The use of the word "should" is as a recommendation, compared to the use of the word "must" which is used for criteria that is mandatory, for example on page 6: >The issuing company MUST have the following organizational structure and share type... Now being that it's a suggestion instead of a mandatory requirement, one would reasonably expect there to be an example that goes against that recommendation, and of course there are plenty but for a very recent example take CZR, which was just added to the S&P 500 in March of 2021 despite not having produced a profit since 2019. https://finance.yahoo.com/quote/CZR?p=CZR https://finance.yahoo.com/quote/CZR?p=CZR It doesn't fall under any of the exemptions either.

AlotOfReading 5y ago

Wasn't this the result of the profit criterion, not an active decision?

NicoJuicy 5y ago
Correct. To be included in the S&P you need to be average quarterly profitable + your most recent quarter needs to be profitable.
hartator 5y ago
TSLA was matching the profit criterion for a while but was left out because it was too dependent on gov incentives. Which is fine but it is an active decision. As they are not making this kind of arbitrage for other companies relying on gov interventions and gov policies as well.
- stonogo 5y ago
  Which companies?
  - pvarangot 5y ago
    Not OP but maybe the defense contractors? Raytheon, Lockheed, General Dynamics and I think Teledyne are in the S&P 500.
    - stonogo 5y ago
      Could be, but of those only Teledyne runs any real risk of losing profitability status as a result of scheduled ends of government incentives. I'm having a hard time finding out which companies OP could be referring to.
    - ineedasername 5y ago
      Tesla was relying on direct subsidies to customers for purchasing a Tesla. That's a little different than government contracts or massive tax breaks.
Kranar 5y ago
The S&P 500 is selected by a committee vote, so every inclusion is an active decision. There are hundreds of large companies excluded from it for arbitrary reasons, including Dell, Snapchat, Square and literally hundreds of others.
- thaumasiotes 5y ago
  But your grandparent comment isn't complaining about an inclusion. Exclusion is almost always a passive decision, as it was in this case.
- astrange 5y ago
  Yes, the S&P 500 is an active index. Its ETFs are passive because they only track that index.

CapriciousCptl 5y ago

Nothing worth being upset about here; stocks aren't eligible for inclusion to the S&P500 until they have a trailing 4 quarters of profit.

Kranar 5y ago
This is not true, it's a recommendation but it's not a requirement: https://www.spglobal.com/spdji/en/documents/methodologies/methodology-sp-us-indices.pdf https://www.spglobal.com/spdji/en/documents/methodologies/me... At any rate, even if it were a requirement, Tesla satisfied it at the moment that it was excluded.
- CapriciousCptl 5y ago
  Well, I'm not sure what you think you see or where you see it in that 45-page pdf. The S&P 1500 criteria are, for instance, on page 8 and refute what you're saying. On a quick glance I couldn't find the S&P 500 criteria in that, again, 45-page pdf without a page reference. Or you can look here[1] on page 2. [1] https://www.spglobal.com/spdji/en/documents/additional-material/sp-500-brochure.pdf https://www.spglobal.com/spdji/en/documents/additional-mater...
  - Kranar 5y ago
    >Well, I'm not sure what you think you see or where you see it in that 45-page pdf. It's not my responsibility nor is it even possible to find a reference to a claim that is false. If you claim that X is a requirement, I can't possibly cite a specific page that says "X is not a requirement" because it's not feasible to enumerate all things that are NOT requirements. All I can do is refer you to the list of requirements and ask you to point out which item in that list substantiates your position. That is what I've done by referencing that document which specifies the eligibility criteria and methodology and that's about the most anyone can do since it's generally not possible to prove a negative. Now you mistakenly believe that page 8 substantiates that claim, but it doesn't. What page 8 states is the following: >The sum of the most recent four consecutive quarters’ Generally Accepted Accounting Principles (GAAP) earnings (net income excluding discontinued operations) SHOULD be positive as SHOULD the most recent quarter. The use of the word "should" is as a recommendation, compared to the use of the word "must" which is used for criteria that is mandatory, for example on page 6: >The issuing company MUST have the following organizational structure and share type... Now being that it's a suggestion instead of a mandatory requirement, one would reasonably expect there to be an example that goes against that recommendation, and of course there are plenty but for a very recent example take CZR, which was just added to the S&P 500 in March of 2021 despite not having produced a profit since 2019. https://finance.yahoo.com/quote/CZR?p=CZR https://finance.yahoo.com/quote/CZR?p=CZR It doesn't fall under any of the exemptions either.