- November 18, 2020
- Posted by: Stratford Team
- Category: Business
Elon Musk vaulted past Mark Zuckerberg to become the world’s third-richest person after Tesla snagged a spot in the S&P 500, turbocharging the electric-car maker’s stock.
Tesla shares on Tuesday jumped as much as 13 percent to $462 in early trading on news that the benchmark index is finally adding Tesla — a development that will require big investment firms that duplicate the index to buy the company’s shares.
The early jump added $12 billion to Musk’s wealth, according to Bloomberg’s Billionaires Index, and puts Musk’s real-time net worth as of mid-Tuesday at more than $114 billion. That still lags Amazon CEO Bezos and Microsoft magnate Gates, who are worth $184 billion and $129 billion, respectively.
Nevertheless, it’s comfortably ahead of Zuckerberg, who was worth $106 billion as of Monday. Tesla shares were recently up 9.3 percent at $446 in midday trades Tuesday, while Facebook shares slid 1.6 percent to $274.50.
Musk had briefly supplanted the Facebook boss in the No. 3 spot in early September as the company’s shares rose on anticipation that the company would soon be admitted to the S&P 500. But Musk’s net worth tanked after the S&P delivered a surprise snub to Tesla a week later, sending the company’s shares tumbling 20 percent.
Despite the stumbles, Musk has seen his wealth grow by nearly $90 billion this year, a bigger gain than anyone else on Bloomberg’s list of the world’s 500 richest people. Like Zuckerberg, the size of Musk’s fortune is heavily dependent on the stock price of his company, which could climb even further ahead of its S&P 500 debut on Dec. 21. The shares are up fivefold so far this year.
The Silicon Valley automaker had been expected to join the list in its September rebalancing after posting a fourth consecutive quarterly profit in July. Garrett Nelson, an analyst at CFRA, speculated that the index may have been looking for an extra quarter of stability from the notoriously volatile stock before letting it in.
S&P may have also been concerned about the quality of Tesla’s earnings, with the company relying on regulatory credit revenue to achieve profitability, Nelson said. But after the fifth straight quarterly profit, Nelson mused that the committee “could no longer deny membership” to Tesla, noting that the automaker is already larger than 95 percent of the companies in the index by market cap.
“I don’t think we’ll ever know why they decided not to include Tesla [in September]. Their process is very tightly guarded,” Nelson said. “Even the companies themselves don’t know about changes to their index before they are announced.”
Still, Nelson added that inclusion in the S&P 500 won’t change anything for Tesla from an operational perspective, and that investors are still looking to see the automaker’s growth and execution story continue.
In the near term, Nelson says the main concern for Tesla will be a potential shutdown of its Fremont, California factory as the state begins to reimplement coronavirus lockdowns.
The last time Tesla was shut down, Musk railed against state officials, going as far as to declare he would be willing to be arrested on the factory floor rather than remain closed, and threatened to move production to Texas.
“We think there would be a lot of reluctance from Alameda County officials to [close the factory] given Musk’s threats during the last shutdown,” Nelson said.