KEY POINTS
- Tesla has the least institutional ownership among the big tech U.S. companies: Bloomberg data.
- Weak board, capital allocation, high valuation and divided attention of Musk could be playing in minds of institutions, Gary Black says.
Tesla, Inc. may not be a hit with institutional investors, noted bull and Future Fund founder Gary Black said, citing Bloomberg data.
Tesla stock is under-owned by institutions, the fund manager said.
Future Fund’s actively managed The Future Fund Active ETF has Tesla as its top holding, accounting for about 12.4% of the total.
Tesla Lags: Alphabet, Inc. has the highest institutional ownership of 85% among the large-cap tech names, data shared by Black on Twitter showed.
Elon Musk-led Tesla took the last spot in the list of seven tech names for which data was shared. Institutional holding accounted for 44% of Tesla’s outstanding shares.
The numbers for the other companies are as follows:
- Meta Platform, Inc. 80%
- Microsoft Corporation 75%
- Amazon, Inc. 71%
- Nvidia Corporation 70%
- Apple, Inc. 62%
As a percentage of float, Tesla’s institutional holding sports a better number of 53% but it is still the lowest in the group, Black said. Float refers to the number of outstanding shares less any restricted shares. Restricted shares are those securities that are not fully transferable from the issuing company to the person receiving the award until certain conditions are met.
What’s Scaring Off Institutions? A weak board of directors, key executive risk, capital allocation, high valuation and the divided attention of the CEO could be the potential reasons for relatively light institutional investors, Black said.
The Tesla bull also noted the company's non-investment grade debt rating may have restricted some mutual funds from owning the stock. This could be less of a factor due to the company's strong balance sheet and the expectations that rating agencies will upgrade its debt rating this year, he said.
Black also shared a Business Insider story that delved into Vanda Research’s note, which said retail interest in Tesla has risen considerably ahead of the imminent 3-for-1 stock split.
Tesla shareholders will vote on the company’s proposal to enact the stock split at the annual shareholders meeting Thursday.
Net retail purchases of Tesla reached $693 million in the previous five sessions, Vanda reportedly said in its weekly note, adding that “purchases are skyrocketing – retail investors have never been so bullish since summer ’20.”
TSLA Price Action: Tesla stock broke above the $900 psychological mark this week for the first time since early Mary. The stock closed Wednesday’s session 2.27% higher at $922.19, according to Benzinga Pro data. In premarket trading on Thursday, the stock is rising an incremental 1.03% to $931.70.