When Tesla Joins the S&P 500, You Know It’s Game Over

Bloomberg (11/17/2020)
  • It was announced that Tesla will be added to the S&P 500 index of the largest publicly-traded American companies.
  • However, history is littered with instances of fast-growing companies added to the index shortly before a major collapse.
  • For example, Yahoo was added (December 1999) four months before the tech bubble burst.
  • While Tesla’s finances have drastically improved (Q3 2020 cash inflow of $2.4 billion), its $400 billion valuation is hard to justify given $556 million in net income over the last 12 months.