Tesla (TSLA) is expected to be about to finally get rid of its junk bond rating and become a blue chip something somewhat overdue for the sixth most valuable company in the world.

Despite delivering profits for more than two years straight and building a cash position of over $18 billion while sitting on very little debt, Tesla is still rated as a junk bond by rating companies like S&P Global Ratings and Moodys Investors Service.

Now rating experts and analysts are expecting Tesla to finally be upgraded by the end of the year.

Bloomberg Intelligence credit analyst Joel Levington commented:

Tesla is still generating a huge amount of cash. At some point ratings companies will have to act and I wouldnt be surprised to see an upgrade to investment-grade happen before year-end.

While this may not be important for the average investor and Tesla shareholders, but it is a big deal for some large funds that often have a policy not to invest in companies that have anything less than an investment grade rating often referred to as blue chips. This has been preventing some large funds from investing in Tesla.

This resulted in Tesla having a smaller percentage of its shares being held by large institutional investors compared to its peers with extremely large valuations, like Apple and Amazon.

Tesla was upgraded to BB+, one step below investment grade, by S&P last October and by Moodys in January.

Nishit Madlani, the head of North American auto-sector ratings at S&P, even stated in June that Tesla is likely going to be upgraded by the end of this year.

This is one of the last things that Tesla needs to solidify it as a blue chip company.

Obviously, I think that some funds are still going to have issues holding Teslas stock for other reasons, like how controversial Elon Musk can be for some people, but for the most part, this is the last of the manageable hurdles.

Now what does it change?

Not much really other than it can bring more stockholders, which reduces the number of shares available to buy and can therefore boost the stock price.

In turn, Tesla can use that to raise more money to put toward its mission though the automaker doesnt really need more money right now.

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Tesla (TSLA) is about to earn its blue chip status and climb out of the junk bond dumpster - Electrek.co