The Big Bar Tab of Passive Equities Comes Due when Tesla Joins the S&P 500 Index in December
Posted on 11/30/2020
Funds exposed to passive equity strategies are bracing for Tesla Inc.’s arrival to the S&P 500 Index on December 18, 2020. Tesla will be the largest company to ever join the S&P 500 Index. Tesla will be the sixth largest listed company by market capitalization. Tesla is now the most valuable auto manufacturer in the world, with a market capitalization of US$ 550.79 billion. To compare, Ford Motor Company has a market capitalization of US$ 35.46 billion and Honda Motor Company has a market capitalization of US$ 50.58 billion.
Tesla’s share price jumped 40% right after the S&P 500 announcement on November 16, 2020.
The investors who will pay the price if Tesla faces downward volatility would be passive S&P index investors.
BYE BADGER: GM to Ditch Nikola Deal, Opts for New MoU
General Motors (GM) is giving up its equity stake in Nikola Corporation (formerly Nikola Motors). Furthermore, GM is ditching plans to build the electric truck maker’s Badger pickup. Nikola shares plummeted more than 20% on the GM exiting news.
After the September news of GM and Nikola partnering together, a short seller researcher company Hindenburg Research released a report leveling allegations of fraud and exaggeration against the “zero-emissions truck” company and its then-chairman Trevor Milton. During the revealed allegations, GM informed investors that it had not yet closed the deal with Nikola. In the 9 months ended September 30, 2020, Nikola had net income of US$ -237,275,000 and revenue of US$ 95,000 from a contract with a customer. According to a June company press release, Nikola expects to generate revenue by 2021 with the roll out of its Nikola Tre Class 8 BEV. On November 30, 2020, Nikola had a market cap of US$ 7.92 billion.
On November 30, 2020, Nikola disclosed the signing of a non-binding Memorandum of Understanding with General Motors for a global supply agreement related to the integration of GM’s Hydrotec fuel-cell system into Nikola’s commercial semi-trucks. This supersedes and replaces the transaction announced on September 8, 2020. Under the terms of the MOU, Nikola and GM will work together to integrate GM’s Hydrotec fuel-cell technology into Nikola’s Class 7 and Class 8 zero-emission semi-trucks for the medium- and long-haul trucking sectors. GM will no longer take a stake in Nikola.
Hindenburg Research also alleges that Chinese electric-vehicle manufacturer Kandi Technologies falsified revenue by recording transfers to affiliated companies as sales.