High-flying Tesla stock takes a hit on 1st day in S&P 500
DETROIT » In the middle of last year, Tesla’s losses were piling up, sales weren’t enough to cover expenses and big debt payments loomed. The situation was so bad that one influential Wall Street analyst raised the possibility that Tesla wouldn’t be able to pay its bills and would have to be restructured financially.
Since then, the electric car and solar panel maker’s shares have skyrocketed, rising nearly 700% this year alone. Monday was its first day of being included in the prestigious S&P 500, and it didn’t go well. Shares tumbled 6.5% to $649.86 even though the index as a whole lost only 0.4%. The stock hit a record high on Friday.
Tesla’s rise to become the world’s most valuable automaker and rank among the top 10 biggest U. S. companies in the index is a surprising accomplishment considering that the company lost $1.1 billion in the first half of 2019. The increase was so stunning
that even CEO Elon Musk has said the shares are overpriced.
Global sales hit a record of almost 140,000 vehicles in the third quarter, debt has been reduced with proceeds from stock offerings, and Musk’s company is building two huge factories to make new vehicles and satisfy demand. Intensely loyal followers have invested billions and Musk has become the world’s third-richest man, according to Forbes.
Tesla and Musk have for years engendered strong
divisions on Wall Street, and the rise from nearcollapse to an astronomical valuation is no exception.
Many investors who drove Tesla’s value higher are individuals who bought the stock after a five-forone split reduced the price of a single share last summer. The bulls are largely betting on the company’s future and point to five straight profitable quarters, rising sales, and world-leading battery and software technology to justify their bets.