Bloomberg: "Tesla’s S&P 500 Inclusion Hinges on Earnings Quality: DataTrek"

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Bloomberg: "Tesla’s S&P 500 Inclusion Hinges on Earnings Quality: DataTrek"

Excerpt from Bloomberg quoting DataTrek’s Nick Colas:

…. “Specifically, Tesla would not have made money on a generally accepted accounting principles basis the last several quarters without the sale of regulatory credits to carmakers that need help complying with toughening emissions standards around the world. In the first half of this year, the company booked $782 million of revenue from the sale of those credits, which are pretty much all profit, according to Nicholas Colas, DataTrek’s co-founder. That compares with $220 million posted in GAAP net income.

“This puts the S&P committee in charge of adding names to the 500 in a real bind, because while to the letter of their ‘law’ Tesla qualifies for inclusion this is purely due to regulatory arbitrage — not fundamental profitability from designing, manufacturing and selling cars,” wrote Colas, who in the 1990s spent nearly a decade as an equity auto analyst at First Boston.

Essentially, Colas’s concern is that the money Tesla earns from its core business may still be too skimpy and volatile for S&P Dow Jones to be comfortable with. A lot rides on whether such judgments would keep it out of the index, given at least some of the stock’s 380% rally this year is predicated on anticipation it will be included”….

Read the full article here on Bloomberg!