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Controversial Twitter poll could result in an increase in the car maker’s free float
Thursday 11 Nov 2021 Author: Steven Frazer

Elon Musk’s pledge to sell 10% of his Tesla shares following his controversial Twitter poll could force US tracker funds to buy more stock because of the way they calculate index stock weightings.

In the UK, tracker funds work out how much of each FTSE index constituent they should own based on a company’s market value. Tesla is a member of the S&P 500 in the US and this index use the free float-adjusted system, which only uses readily available shares for weighting calculations, excluding stakes held by founders, senior management and other insiders.

Musk, who is Tesla’s largest shareholder, owns approximately 170.5 million shares, implying a sale of more than 17 million shares worth nearly $18 billion which will swell the number of easily traded stock (i.e. the free float).

Tesla’s free float is currently calculated at 802 million shares or 79.9% of the shares in issue. Post Musk’s proposed share sale the free float will increase to approximately 81.5%.

Exchange-traded funds that may need to adjust their equity weightings for Tesla include the Vanguard S&P 500 (VUSA) and iShares S&P 500 (IUSA), both of which track the S&P 500 index.

Shares in Tesla fell nearly 5% on 8 November in response to Musk’s Twitter poll which voted in favour of the entrepreneur selling some of its holding in the company.

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