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AIQ Editorial TeamGlobal Investment Thinking @avivainvestors
In the latest instalment of our visual series on topical data themes, we look at Tesla’s market cap relative to the European “Big Five” carmakers, the average CSR spending of FTSE 100 companies versus their procurement budget and the most common reasons for a CEO to leave a company.
Has Tesla’s market cap overtaken the European “Big Five”?
Tesla’s share price has been on an incredible run, with investors buying into Elon Musk’s growth story.
Tesla’s stock rose a whopping 690 per cent last year
Efforts to decarbonise industries and the potential for electric power to help meet the goals of the Paris Agreement have provided a tailwind – along with excitement around a future ecosystem of tech-enabled add-ons and innovative potential growth business areas like SpaceX and artificial intelligence. For many, Tesla is as much a tech company as it is a carmaker.
Tesla’s stock rose a whopping 690 per cent last year, surging from $88.60 to $699.99. This made it one of the most valuable companies in the world, with its market capitalisation growing to $630 billion. That positive direction continued into early 2021, with the highest valuation reached on February 2 ($837 billion).
Figure 1: Tesla’s market cap’ growth since its inception on May 29, 2010 (US$)
Source: Eikon, Aviva Investors, as of May 11, 2021
While Tesla’s market cap has since fallen back to $606 billion, it is still significantly higher than the top five European carmakers combined (Volkswagen, BMW, Daimler, Renault and Peugeot).
Figure 2 shows how Tesla has grown since 2017. Back then, its market cap was less than a fourth of the European Big Five; it is now more than double.
Figure 2: Tesla versus the European ‘Big Five’ (market cap in $)
Source: Bloomberg, Aviva Investors, as of May 11, 2021
The halo effect: Can companies change their supply chains for the greater good?
Each year, companies establish a procurement budget; the amount available to purchase supplies or services needed to run their business.
Figure 3 shows that while the average procurement budget of a FTSE 100 company is £4 billion, the average corporate social responsibility (CSR) spend is £10 million – a ratio of 400:1.
Figure 3: Procurement budget versus the average CSR spend of average FTSE 100 companies1
Source: ‘Buy social corporate challenge: Year 3 impact report’, Social Enterprise UK, 2019
Viewed through one lens, this is depressing. However, it also highlights the latent power within supply chains to tackle environmental and social issues. Each firm can play a part with the suppliers above them in the value chain.
Each firm can play a part with the suppliers above them in the value chain
There are also several initiatives, such as the Buy Social Corporate Challenge, which aim to unlock the power of corporate spending to benefit wider society through sourcing from social enterprises (businesses with a social or environmental mission).
PwC, for example, buys toiletries for its employee bathrooms from The Soap Co., which makes vegan, cruelty free, natural and certified plastic-free products, as well as employing visually impaired or otherwise disabled workers in the UK.2
What are the main reasons for CEO exits?
Analysis of the departures of 7,610 chief executives from S&P 1500 firms between 2000 and 2018 shows the most common official reason given is retirement – representing around one out of two departures.
Retirement represents around one out of two departures
The second and third most common reasons come under the tags of “other” and “dismissed for job performance” – around one out of three and six CEOs respectively.
On average, only two per cent left because a new opportunity arose elsewhere. As to whether there is more than meets the eye to the ‘official line’ on an exit, that is something that may not emerge until much time has passed.
