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Posted on EVANNEX on March 27, 2023, by Peter McGuthrie

Elon Musk spent much of last year selling off Tesla stock, though he remains the company’s largest individual stakeholder. However, despite a disdain for index funds and passive investing, some of the firms now make up a large portion of Tesla’s shares.

Above: (Image: Casey Murphy / EVANNEX).

Musk now owns fewer Tesla shares than the market’s three largest index funds, BlackRock, Vanguard and State Street, combined, as detailed in a recent report from Financial Times. While he’s still Tesla’s largest individual shareholder with a 13.02-percent stake, the three index funds comprise a combined total of 13.58 percent.

Tesla joined the S&P 500 in 2020, and it has since become a part of many index funds which have had to purchase the automaker’s shares at the company’s weighting in benchmarks. At the time of Tesla’s inclusion into the S&P index alone, nearly $2 trillion in index funds that followed the firm’s holdings were forced to purchase the automaker’s shares.

Since then this has led to Vanguard, Blackrock and State Street owning 6.85 percent, 3.6 percent and 3.13 percent of Tesla’s stock, respectively. Vanguard is also now the second-largest shareholder of Tesla, behind Musk himself.

Musk has also been vocal in his support of active investment over passive funds in the past, and while each of the three indexes may well be investing in Tesla with their active funds, most of these stakes are likely made up of passive investments.

“Right before he died, Jack Bogle (of Vanguard fame) said index/passive funds were too great a percentage of the market and he really knew what he was talking about!” Musk wrote on Twitter last May. “There should be a shift back towards active investment. Passive has gone too far.”

Still, Tesla’s index fund ownership is less than the average passive ownership of most U.S. companies listed on the stock market, as Financial Times points out. Musk also says he doesn’t plan to sell any more Tesla shares for this year, with plans to hold off for 18-24 months.

The news also comes just as Moody’s has upgraded Tesla’s issuer rating to a “Baa3,” signifying that the stock is established well enough to be considered investment-grade.

Prior to this change, Moody’s still had Tesla’s stock ranked as a speculative “Ba1” rating, with the firm highlighting the company’s impressive financials in the upgrade. The S&P Global Ratings index upgraded Tesla to investment-grade last year, meaning that it’s successfully meeting its financial commitments and demonstrating leadership in its market.

Source: Financial Times


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