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S&P 500 to swallow Tesla in one gulp; shares surge

Stock MarketsNov 30, 2020 08:00PM ET
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© Reuters. FILE PHOTO: Logo of Tesla

By Arunima Kumar and Noel Randewich

(Reuters) - Tesla (NASDAQ:TSLA) Inc shares jumped 4% in extended trade on Monday after S&P Dow Jones Indices said it would add one of Wall Street's most valuable companies to the S&P 500 index all at once on Dec. 21.

Adding Elon Musk's Tesla to Wall Street's most followed benchmark will force index funds to buy about $73 billion worth of its shares, S&P Dow Jones Indices said.

The electric car maker's stock has surged over 40% since Nov. 16, when it was announced Tesla would join the index.

At that time, S&P Dow Jones Indices said it would consult investors about whether to potentially add Tesla in two tranches a week apart to make the addition easier to handle for index funds.

"In its decision, S&P DJI considered the wide range of responses it received, as well as, among other factors, the expected liquidity of Tesla and the market’s ability to accommodate significant trading volumes on this date," S&P Dow Jones Indices said in a media statement.

With a stock market value around $550 billion, Tesla will be among the most valuable companies ever added to the index. Tesla will account for just over 1% of the S&P 500.

Up about 600% in 2020, the California-based car maker has become the most valuable auto company in the world, by far, despite production that is a fraction of rivals such as Toyota Motor (NYSE:TM), Volkswagen (DE:VOWG_p) and General Motors (NYSE:GM).

A blockbuster quarterly report in July cleared a major hurdle related to profitability that had prevented Tesla's inclusion in the S&P 500.

About a fifth of Tesla's shares are closely held by Musk, the chief executive, and other insiders. Since the S&P 500 is weighted by the amount of companies' shares actually available on the stock market, Tesla's influence within the benchmark will be slightly diminished, putting it at around seventh place, currently held by Johnson & Johnson (NYSE:JNJ).

S&P Dow Jones said it would announce on Dec. 11 which company Tesla would replace in the S&P 500.

S&P 500 to swallow Tesla in one gulp; shares surge
 

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Comments (11)
Gamer Turtle
GamerTurtle Dec 01, 2020 1:11AM ET
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all indices will eventually follow movement of nasdaq100. lol
Mike Brarey
Mike Brarey Dec 01, 2020 12:36AM ET
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This will be looked back at as the top of the growth bubble of 2010s
moahmmed ahmed
moahmmed ahmed Nov 30, 2020 11:08PM ET
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history will remember Elon Musk as one of the finestentrepreneur.
Cornelius Tanase
Cornelius Tanase Nov 30, 2020 9:44PM ET
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good news Tesla just keeps getting better, Elon, you are a genius!
Avi Karpel
Avi Karpel Nov 30, 2020 8:04PM ET
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Welcome to Tesla Casino, a manufacturer that sell ONLY 1% of the cars in the US, has value of ALL the US and German and Japanese auto makers COMBINE, wow, and hey, it is still not enough...buy more at a higher it is cheap, just plain shocking!!!
Fairway Litchfield
Fairway Litchfield Nov 30, 2020 6:06PM ET
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The stock will be added at its full float-adjusted market capitalization before the open of trading on Dec. 21,
Marco cuevas
Marco cuevas Nov 30, 2020 6:06PM ET
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S&P has to swallow billions of stocks good news for me.
Gregory Bashaw
Gregory Bashaw Nov 30, 2020 6:04PM ET
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The stock will be added at its full float-adjusted market capitalization before the open of trading on Dec. 21,
Fairway Litchfield
Fairway Litchfield Nov 30, 2020 6:04PM ET
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Same as company
Clinton Powell
Clinton Powell Nov 30, 2020 5:59PM ET
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Meaning all the S&P funds will have to have the stock in their portfolio BY 12/21
Trump Ronald
Trump Ronald Nov 30, 2020 5:49PM ET
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who can help? plz tell me the single tranche?
Trump Ronald
Trump Ronald Nov 30, 2020 5:49PM ET
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who can explain the single tranche?
Diligent Investor
Diligent Investor Nov 30, 2020 5:49PM ET
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All at once
katya litski
katya litski Nov 30, 2020 5:49PM ET
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google
 
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