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Tesla Sinks in Worst 1-Day Loss on GM-Nikola Deal, S&P Snub

Tesla Sinks in Worst 1-Day Loss on GM-Nikola Deal, S&P Snub

(Bloomberg) — Tesla Inc. shares fell the most ever Tuesday after the electric-vehicle maker missed out on being included in the S&P 500 Index, taking investors who had bet on its entry to the benchmark by surprise.

Tesla shares closed down 21% to $330.21, shaving $82 billion from its valuation. Declines started premarket and worsened as General Motors Co. said it would take a $2 billion equity stake in Nikola Corp. and partner with the fledgling truck maker to engineer and manufacture its Badger pickup. Meanwhile, Tesla said it took just a few days for it to complete its $5 billion share sale, which had set off a three-day losing streak for the stock after it was announced last week.

Tesla’s share price had largely reflected the assumed inclusion ahead of the S&P’s Friday announcement, said Baird analyst Ben Kallo, who called the decision “a relatively surprising development.” Instead of Elon Musk’s Tesla, S&P Dow Jones Indices added online retailer Etsy Inc., chip gear maker Teradyne Inc. and medical technology firm Catalent Inc.

“We think shares were reflecting expectations for substantial passive inflows,” with an estimated $4.5 trillion of assets indexed to the S&P 500, Kallo wrote in a note Tuesday. “We think the stock could be under pressure following the delay of S&P 500 inclusion, particularly from investors who bought ahead of the announcement expecting an opportunity to sell to passive funds.”

Tesla, which had defied gravity and market watchers for much of the year, was the worst performer on the Nasdaq 100 Index Tuesday, which fell 4.8% amid a broad selloff in equities. The speculative fever that drove bullish bets in options markets and saw shares in bankrupt companies surge has broken in September, wiping out trillions in market value.

Kallo said he still expects Tesla will eventually be added to the benchmark, and the company’s “Battery Day” event planned for Sept. 22 could be a positive catalyst.

Tesla’s failure to make it into the S&P 500 may be connected to “question marks about the sustainability of regulatory emission credit sales which are currently underpinning earnings,” said Michael Dean, an analyst with Bloomberg Intelligence.

Tesla has soared nearly 300% this year, making it the second best performer in the Nasdaq 100 Index behind Zoom Video Communications Inc. The carmaker reported its fourth quarterly profit in a row in July and its much-hyped Battery Day may also have boosted optimism since many investors expect the company to unveil new technologies that day. The relentless rally had swelled the firm’s valuation; by Tuesday’s close it was nearly level with that of Toyota Motor Corp., General Motors, Ford Motor Co. and Fiat Chrysler Automobiles combined.

(Updates to reflect closing prices; adds chart)

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