Making sense of the markets this week: September 14

Making sense of the markets this week: September 14


Photo by Maxim Ilyahov on Unsplash

Each week, Cut the Crap Investing founder Dale Roberts shares financial headlines and offers context for Canadian investors. 

Tesla snubbed by the S&P 500, and now it’s getting hit on all sides

What a difference a week can make.

In last week’s column, we discussed how Tesla’s valuation was enough to buy six major global automakers. Dan Hallet of Highview Financial Group tweeted: 

Source: Twitter

And now? Tesla’s stock was down nearly 35% from last Tuesday, Sept. 1, to Thursday, Sept. 10. In addition, the electric carmaker also created a massive number of new shares, reducing the percentage of ownership of the company for current shareholders. On Sept. 1, Tesla announced plans to sell up to about $5 billion in new shares. That cut the price of each share by one-fifth. On September 8, Tesla announced it had completed that sale

The electric carmaker is getting hit on all sides. In addition to the valuation fears, it’s soon to face competition: GM has teamed up with Nikola Corporation with a plan to create electric-powered pickup trucks. Morgan Stanley called the partnership a win for both General Motors and Nikola, joining several investment firms with a positive take on the big announcement.

GM plans to incorporate the Nikola technology into other vehicles

Adding insult to injury, Tesla was not invited to join the S&P 500 index. The company did qualify for inclusion after reaching four consecutive quarters of profitability. But the index committee drove right past Tesla and went for three other companies. That provided another hit to Tesla, as many analysts suggest the expected S&P 500 inclusion was already priced into the stock. (When a stock is a part of the world’s most followed index, that can support the share price; all of the mutual funds and Exchange Traded Funds [ETFs] that track the S&P 500 would have to buy the stock.) 

But fear not, shareholders: Tesla share prices are still up almost 700% over the last year.

Cogeco owners declare their shares are not for sale

Canada is dominated by the Big 3 telcos: Bell, Telus and Rogers. But there are other players in the field. And that includes Quebec-based Cogeco, which is being targeted in an unsolicited $10.3 billion takeover bid by Altice—a U.S. company. 

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