In an SEC filing this week, investment bank JP Morgan Chase revealed it is establishing what it calls a “cryptocurrency exposure basket.” Investors can buy structured notes whose value is tied to 11 stocks from companies involved in Bitcoin or other cryptocurrencies. 

As the basket is based partly on each company’s exposure to Bitcoin as well as liquidity, it includes selections such as cloud software developer MicroStrategy, payments company Square, mining firm Riot Blockchain, and chipmaker Nvidia. (Stocks in those four firms comprise 68% of the basket.)

But it’s missing an obvious target: Tesla.

Tesla bought $1.5 billion worth of Bitcoin earlier this year and holds an estimated 0.3% of its treasury in the digital asset. Among publicly traded companies, only MicroStrategy has a larger stockpile of Bitcoin, according to Bitcoin Treasuries, with 91,064 BTC—enough for Bitcoin volatility to impact MicroStrategy’s day-to-day stock price.

By comparison, Square has 8,027 BTC, comprising 0.4% of its holdings, and Riot has 1,175 BTC (1.7%). Nvidia, while it doesn’t have Bitcoin on the books, makes graphics processing units that are used in crypto mining.

What gives?

In short, JP Morgan thinks Tesla’s stock price is too high. 

JP Morgan analysts warned on December 9, 2020:

"We recommend investors not weight Tesla shares in their portfolio in equal proportion to the S&P because Tesla shares are in our view and by virtually every conventional metric not only overvalued, but dramatically so." 

Tesla’s stock price closed that day at $604.48. Since it currently stands at $668 after coming down from an all-time high of $900, not much has happened to change the investment bank’s view.

Instead, JP Morgan filled out the remaining 32% of the basket with stock in PayPal (10%), which has integrated Bitcoin and other crypto purchases onto its app; semiconductor companies Advanced Micro Devices (5%) and Taiwan Semiconductor Manufacturing (5%); crypto derivatives marketplaces Intercontinental Exchange (4%) and CME Group (4%); furniture retailer Overstock.com (2%), which runs a blockchain wing; and Silvergate Capital (2%), a bank for cryptocurrency firms.

Investors can buy into the basket with a minimum of $1,000. For its troubles, JP Morgan deducts 1.5% of the investment and returns.