Tesla has also announced that it completed a sale of $5B in shares through its "at-the-market" offering program
Shares of Tesla (TSLA) are under pressure on Tuesday after not being included in S&P 500 Index. Tesla had been widely speculated as a potential entrant into the index. Calling the omission to S&P Index "surprising," Baird analyst Ben Kallo noted that Tesla met all the criteria necessary to be added to the index and that he sees this as only a delay.
S&P 500 SNUB: Despite investors' expectations given its market value and recent record of sustained profitability, Tesla was not selected to be added at this time to the S&P 500 Index. On September 4, S&P Dow Jones Indices said that S&P MidCap 400 constituents Etsy (ETSY), Teradyne (TER), and Catalent (CTLT) will move to the S&P 500, replacing H&R Block (HRB) Coty (COTY) and Kohl's Corp. (KSS), all of which will move to the S&P MidCap 400. The changes, being made to ensure each index "more appropriately represents its market capitalization range," will be effective prior to the open of trading on Monday, September 21, 2020 to coincide with the September quarterly rebalance, S&P said.
In a research note to investors, Baird analyst Ben Kallo said Tesla's omission to the S&P 500 Index was surprising as it met all the criteria necessary to be added. The analyst believes shares will likely be under pressure as a result but believes the stock will eventually be added and sees this as only a delay. Kallo pointed out that Tesla will host a virtual Battery Day on September 22, which he believes could be a positive catalyst. The analyst maintained a Neutral rating and $332 price target on Tesla shares.
$5B STOCK SALE: In a regulatory filing, Tesla disclosed that on September 4, the company completed the sale of $5.0B, before commissions, of its common stock through its "at-the-market" offering program previously disclosed on September 1. The final settlement of the shares sold is expected to be completed by September 9, Tesla stated.
WHAT'S NOTABLE: Nikola (NKLA) and General Motors (GM) announced a strategic partnership that begins with the Nikola Badger and carries cost reductions through Nikola's programs, including Nikola Badger, Nikola Tre, Nikola One, Nikola Two and NZT. As part of the agreement, Nikola will utilize General Motors' Ultium battery system and Hydrotec fuel cell technology, representing a key commercialization milestone for General Motors. Nikola will exchange $2B in newly issued common stock for the in-kind services and access to General Motors' global safety-tested and validated parts and components. General Motors will be subject to a staged lock-up provision beginning in one year and ending in June 2025.
General Motors will engineer, homologate, validate and manufacture the Nikola Badger battery electric and fuel cell versions. The agreement with Nikola extends General Motors' utilization of its fuel cell technology to the Class 7/8 semi-truck market and represents a high-volume commercialization of its leading Hydrotec fuel cell system and complements the company's battery-electric propulsion. Nikola will be responsible for the sales and marketing for the Badger and will retain the Nikola Badger brand. The Badger was first announced on February 10, 2020 and will make its public debut December 3-5, at Nikola World 2020 in Arizona. Badger production is expected to start in late 2022 at a location to be announced at a later date. Nikola remains an independent company. The investment is subject to customary antitrust regulatory approval and closing conditions. The parties anticipate closing the transaction prior to September 30, 2020.
PRICE ACTION: In morning trading, shares of Tesla have dropped almost 15% to $356.30.