Salam,
I was doing the screening for Tesla stock. It seems compliant on debt to market cap ratio (18%) while non-compliant on debt to assets ratio (41%). Can you please guide here?
Wa alaykum salaam,
@Mohsin_from_IFG and @ibrahimkhan can assist with the technical analysis.
Regards
Salaam
We used to help people with stock screening until the volume just became too much. But we’ve created a simple course to show you how to go about screening shares yourself. The course is accessible here.
I have taken your course. Quite helpful indeed. However, this concept is a little confusing to me, i.e. should I use debt to market cap or debt to total assets.
Wa alaykum salaam,
With the current volatility in the markets, it maybe wise to use debt to total assets. Both methods are acceptable.
hi. have been looking at islamic investing for a while, and interested in Tesla. The debt to total asset ratio is approx 35-40%. But debt to current market cap is approx 4%. In the past three years, debt to market cap is less than 30%, So, is it halal to invest?
What about at some point in the future, tesla want to provide their own insurance. If they start to do this, will it remain halal, or does it depend on what proportion of their income comes from this source.
JazakAllah
Wa alaykum salaam,
At present, based on what you’ve said and a personal quick review of Tesla’s financials, it seems Shariah compliant. This is also the view of Zoya.
If and when Tesla offer insurance, it may impact their Shariah compliance.
Allah knows best
Salam,
As mufti faraz mentioned in the earlier post that there are two methods of measuring gearing ratio. If you are happy with the mkt cap basis then be informed that HSBC Islamic Global Equity Index’s shariah advisory board measure the debt with regards to the average market Cap and Tesla has been included in the fund now as compliant. Refer top 10 holding section at L&G’s website for reference HSBC Islamic Global Equity Index Fund (The information is based As of 31 August 2020. Stock do become non-compliant so do check regularly)
Salam Alaykum Mufti Faraz, hope you are well.
I agree with the screening, however i’ve received news that tesla have started selling alcohol (tesla tequila) selling at 250 dollars per bottle. The company launched and sold out the product in November and have not said if they would continue alcohol sales. I also could not find how many bottles they sold so don’t know if you had further insight in this regard. Although it may not be above the 5% threshold, it doesn’t sit comfortably with me that they are publicly selling and advertising alcohol sales (begs the question stored like tesco asda do the same so would they be permissible also?). Furthermore, I have seen screens which are regulated by AAOIFI such as zoya which say that the stock would still be shariah compliant. Please could you advise on the permissibility of this stock now. Also looking at the balance sheets we would not have this information.
Hope you are well I pray Allah aids you in the work you are doing.
Assalaamu alaykum,
Investing is a personal decision. From a Shariah compliance perspective, if it passes the screening criteria, then that means at a macro level, the alcohol sales here would be minute and not the major business of the company. As a Muslim, we would dislike this activity totally and purify any gain from here. However, if it passes the screening, you can still invest in the stock from a Shariah compliance perspective. However, from a personal prudence and integrity perspective, a person has the absolute right and decision not to invest.
Allah knows best
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