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5 Highlights From Tesla's Wild September (Thus Far)

By Danny Vena – Sep 12, 2020 at 7:40AM

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The past couple of weeks have been a wild ride for the electric vehicle maker -- even by Tesla standards.

Tesla (TSLA 1.26%) has never been a wallflower. The company has caused plenty of ink to be spilled about its enigmatic founder Elon Musk, the stock's stratospheric and growing valuation, and the ongoing "will they or won't they" debate about whether or not Tesla will meet its quarterly production quotas.

More recently, the company generated a significant amount of buzz with its Aug. 11 announcement of a 5-for-1 stock split, which drove its shares up a mind-boggling 81% from the date of the announcement to the date of the actual split, less than three weeks later.

Have things finally quieted down? Fear not, intrepid investors, because the dramatic trend continued into September, giving investors plenty to ponder regarding their favorite electric vehicle (EV) pioneer. In fact, September is already one for the record books -- and we're only getting started. Here are five highlights from this newsworthy month:

A man sitting with his fingers interlaced behind his head watching a bank of monitors showing graph lines.

Image source: Getty Images.

1. $5 billion stock sale

Tesla stock has been on fire over the past year, with its shares gaining about 1,000% over the 12 months ended Aug. 31. The company sought to capitalize on its soaring stock price and started off the month with a bang, announcing in a regulatory filing on Sept. 1 that it would offer up to $5 billion in stock to the public markets. 

The move was no doubt designed to take advantage of the stock's recent gains and buttress Tesla's balance sheet, which had about $8.6 billion in cash, but more than $14 billion in debt and finance leases to close out the second quarter. 

There was no shortage of takers for the EV maker's stock, as Tesla revealed in a subsequent filing that the $5 billion stock sale was completed as of Sept. 4. 

2. An unexpected snub by the S&P 500

When Tesla reported its second-quarter financial results, the company posted its fourth successive quarter of profitability, clearing the final standards hurdle for its potential inclusion in the S&P 500. In fact, many investors believed that its induction was pretty much a foregone conclusion.

Imagine their surprise, then, when the S&P Dow Jones Indices -- the entity that makes the rebalancing decisions -- announced after the market close on Friday, Sept. 4, that online retailer Etsy, semiconductor gear maker Teradyne, and medical technology company Catalent would be added to the benchmark index -- but Tesla would not. 

Wedbush analyst Daniel Ives said of the decision, "It's kind of a head-scratcher." With trillions of dollars tied to the S&P 500 index, many institutional investors would have added Tesla stock to their tracking funds, which would have pushed the stock even higher. 

It's widely believed that the quality of Tesla's earnings may have been one of the key deciding factors. The company has sold more than $1 billion in emissions credits to other auto makers over the preceding four quarters, which amounts to more than double Tesla's profits during the same period. 

That doesn't mean Tesla's out for good, as the rebalancing occurs each quarter and the selection committee can make changes at any time -- even outside its quarterly announcement.

A Tesla Model S driving on a curvy mountain road with the sunset in the distance.

Image source: Tesla.

3. A record-breaking plummet

The decision to exclude Tesla from the S&P 500 (at least initially) had many investors headed for the exits when the market opened following the long Labor Day weekend. Tesla shares closed down a record-breaking 21% on Tuesday, marking the worst trading day in the company's storied history. 

4. GM takes a $2 billion stake in Nikola

Adding fuel to the stock-drop fire on Tuesday was the revelation that Detroit bigwig General Motors (GM -1.88%) announced it would make a $2 billion investment in EV truck maker Nikola (NKLA -0.60%), resulting in an 11% equity ownership in the company. GM will also help engineer and manufacture Nikola's Badger electric pickup.

This news, which illustrates the increasing competition for Tesla, added insult to injury on Tuesday, giving some investors incentive to take profits in the wake of the stock's recent parabolic rise.

5. SoftBank revelation

While this technically happened earlier, it wasn't reported until early this month, so it's included here. A report in the Financial Times early this month revealed that Japanese tech conglomerate SoftBank Group (SFTB.Y -1.96%) had acquired billions of dollars in stock options (specifically call options) in a number of well-known tech stocks, including Tesla, helping to sustain the tech-centric rally that has gone on for months. 

This is particularly notable since Tesla's share price rocketed more than 74% higher during the month of August alone, and even after its recent drubbing is up nearly 700% over the past year. Call options appreciate much more quickly than stock, so depending on the timing SoftBank could have made a killing on Tesla's recent meteoric rise, or suffered huge losses on its even more recent tumble.

Several people screaming and smiling on a plummeting rollercoaster ride.

Image source: Getty Images.

The month (and the story) is far from over

It's important to note that as of this writing -- and even after its recent fall from grace -- Tesla's valuation is still frothy, with a 12-month forward sales valuation of 11, when a ratio of between one and two is considered attractive.

Still, in this age of Robinhood traders and in the wake of its historic stock split, Tesla has become something of a fan favorite. As my colleague Daniel Sparks pointed out, Tesla is expected to sell 500,000 vehicles this year, which pales in comparison to total global EV sales, which are expected to come in at roughly 1.7 million this year. This gives Tesla a long runway ahead, but its stock will continue to be volatile. In the wake of its 21% decline on Tuesday, shares rose 11% on Wednesday, as if to illustrate the point.

The roller coaster ride is far from over; let the buyer beware.

Danny Vena owns shares of Tesla. The Motley Fool owns shares of and recommends Etsy and Tesla. The Motley Fool recommends Teradyne. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$279.50 (1.26%) $3.49
General Motors Company Stock Quote
General Motors Company
GM
$34.38 (-1.88%) $0.66
SoftBank Group Corp. Stock Quote
SoftBank Group Corp.
SFTB.Y
$17.04 (-1.96%) $0.34
Nikola Corporation Stock Quote
Nikola Corporation
NKLA
$3.83 (-0.60%) $0.02

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