Good news and bad news for Tesla – an honor for its preformance is coming on Wall Street but it faces a continuing federal investigation over safety.
The good: Tesla will join the S&P 500 Index, effective December 21, according to a Monday announcement from S&P Global.
The bad: U.S. safety regulators are continuing their investigation into complaints that Tesla’s giant touch screens can fail and cause the cars to lose the rear camera display and other functions.
Tesla, which is now worth more than Toyota, Disney and Coke, exceeds the value of almost every company in the S&P 500.
To be eligible to join the S&P 500, a company must be based in the United States, have a market capitalization of at least $8.2 billion, be highly liquid, and have at least 50% of its shares available to the public. Its most recent quarter’s earnings and the sum of its trailing four consecutive quarters’ earnings must be positive, as well.
There are over $11.2 trillion in assets benchmarked to the S&P 500, according to S&P Global, including $4.6 trillion of the total in indexed funds.
Tesla will replace an S&P 500 company, information about which S&P Global says will be released at a later date.
“Clearly this is a key positive for shares and indexing purposes and ultimately removes another question mark around the Tesla story going forward,” Wedbush analysts Daniel Ives and Strecker Backe wrote in a note to clients.
Tesla shares were up more than 10% upon the news, according to Refinitiv.
Safety probe
The National Highway Traffic Safety Administration’s report says about 159,000 cars could be affected by the problem. The agency said an engineering analysis has been opened to assess the scope and safety-related consequences of the apparent defect, which could determine whether or not the models need to be recalled.
Failure of the touchscreen can result in loss of the rear camera image display when reverse gear is selected, resulting in reduced rear visibility when backing up, the agency’s report said. The touchscreen failure can also affect defogging ability and audible chimes relating to driver assistance technology, autopilot and turn signals.
A preliminary investigation was opened in June covering 63,000 Model S vehicles with screens controlled by flash memory devices with finite lifespans based on the number of program and erase cycles. The screens can fail prematurely because the memory can wear out.
The same screens and processors were used in 2012 through 2018 Model S and 2016 to 2018 Model X vehicles built through early 2018, the agency said.
