Tesla’s P/E ratio is more than 1000, and much of its stratospheric share price is betting on future increases.
One such bet was that Tesla would be included in the S&P 500, which would have forced a large number of S&P 500 tracking funds to purchase the shares and then lead to further share price highs.
Tesla has been working to meet the criteria, with 4 full profitable quarters and enough revenue, but it seems that in the most recent S&P 500 reshuffle, while 3 new companies were included, Tesla was not one of them.
Newly included companies include Etsy, Teradyne, and Catalent while H&R Block, Coty, and Kohl left the index. Tesla’s share price was down 6% in after-hours trade on the news.
While it seems a bit odd for Etsy to be included and not Tesla, its probably a bit scary to think your pension fund would be subject to Tesla’s volatile share price.