Tesla’s stock fell nearly 7% on its first day of trading as a part of the S&P 500, the most widely watched benchmark of the stock market. I wouldn’t venture to guess a rational reason, but one of the oldest adages on Wall St. is “buy the sizzle, sell the story.” That means that everyone is excited when the announcement is made but when the event actually happens, the excitement fades.
Tesla’s inclusion in the most widely followed index presents a problem for both index fund managers and investors. Because Tesla’s value is far above every other stock in the index, index fund managers have to sell off holding of other stocks in order to fit Tesla in. Also, Tesla’s incredible volatility is another problem that could be magnified because of its overweighted presence in the index.
I have never seen a stock with a greater divergence of opinion. Some people say Tesla is worth $1000/share, at least $750. Others say it’s worth about 10% of its present value, which would put it in the $65 dollar range.
I could get further into the debate, but I would rather explain it face to face. Contact me and let’s talk.