House Speaker Nancy Pelosi now has a financial interest in the success of electric carmaker Tesla, which could benefit from green initiatives that she and other Democrats are expected to help pass in Congress.
Pelosi bought 25 call options on Tesla stock on Dec. 22, with a strike price of $500 and an expiration date of March 18, 2022, according to a government filing. She — “or more likely her husband, Paul Pelosi, who runs an investment firm” — spent between $500,001 and $1 million on the call options, Business Insider reported.
The purchase came a day after Tesla’s Dec. 21 listing on the S&P 500.
Pelosi was the highest-ranking woman elected official in U.S. history until Vice President Kamala Harris’s inauguration on Wednesday. After Harris, Pelosi is No. two in the line of succession for the presidency.
The call options give Pelosi the right to buy 2,500 Tesla shares at $500 each anytime before they expire in March 2022.
Considering Tesla shares were trading at about $850 on Monday, that may sound like a fantastic deal, Market Insider reported. “However, Pelosi will have paid a premium for the options, so Tesla stock would have to climb before they become profitable to exercise.”
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Most likely what happened is Pelosi opted to buy LEAP options — long-term equity anticipation security — since they cost less upfront than buying Tesla shares directly and grant exposure to a stock that skyrocketed by about 700 percent in 2020. “The $500 strike price means the options are ‘in the money’ and won’t be worthless even if Tesla’s stock price treads water or falls by a few hundred dollars by the time they expire,” Business Insider reported.
“Pelosi and her husband love taking long-term options positions,” according to Davemanuel.com, which reported early on the transaction. Tesla closed at $640.34 on the day of purchase, “which means that the per-contract cost was likely in the range of $300-$330 per contract, as Tesla’s options contain a very high amount of extrinsic value (time and volatility),” Manuel wrote.
Shares of Tesla rose 70 percent since S&P Dow Jones Indices announced in November that it planned to add the listing, Wall Street Journal reported. That boosted Tesla’s market value to more than $650 billion — that’s more than three times what Berkshire Hathaway, the second-largest addition to the index by market value, was worth when it was added to the S&P 500 in 2010. Tesla is the sixth-largest publicly-listed company in the U.S. by that measure.
Tesla stock might benefit more from the country’s “blue wave” than from Pelosi’s move alone, according to analyst Daniel Ives of Wedbush, The Street reported.
“A Biden White House and Blue Senate is a very bullish political backdrop and a potential ‘game changer’ for Tesla and the overall (electric vehicle) sector in the US, with a more green-driven agenda now certainly in the cards over the next few years,” Ives wrote in a recent note. A “doubling down” on electric vehicle tax credits and other consumer incentives and government initiatives could help Tesla, as well as General Motors, Fisker and others, Ives added.
President Joe Biden, who has made climate change a priority of his administration, could help Tesla with fuel regulations, stimulus and consumer tax credits, CNBC reported.
Biden talked about adding “1 million new jobs in auto manufacturing, auto supply chains, and auto infrastructure,” including the electric-vehicle recharging infrastructure, Tesla shareholder Joey Klender wrote for Teslarati. There has also been talk of reintroducing the $7,500 EV tax credit that would give buyers a break when they buy a electric vehicle.
“This will benefit Tesla greatly, as the company delivered nearly half a million cars in 2020 alone. The credit disappeared after 200,000 units were sold,” Klender wrote.
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The Senate passed the STOCK Act — Stop Trading on Congressional Knowledge — in early 2012, an election year that later saw Barack Obama win a second term. The STOCK Act was designed to prevent government officials from using inside knowledge gained through their positions to profit in the stock market. It subjected lawmakers to new trading disclosure requirements, Reuters reported in 2012.
Pelosi was a motivating factor its its passage. House Republicans called it the “Pelosi Provision.”
The passage of the STOCK Act shone a spotlight on Pelosi and her husband, Paul, who bought shares in Visa’s 2008 initial public offering. Within two days of the Visa offering, the 5,000 shares purchased by Paul Pelosi had risen $20 each.
“It’s not illegal for members of Congress to have personal financial stakes in the industries on which they legislate. However, The STOCK Act is an original bill to prohibit members of Congress from using private info derived from their official positions for personal benefit,” Tesla investor Sawyer Merritt tweeted.