Tesla Stock to Be Added to S&P 500 Index in Single Tranche

UTC by Benjamin Godfrey · 3 min read
Tesla Stock to Be Added to S&P 500 Index in Single Tranche
Photo: Shutterstock

The growth of Tesla is reflected in the surge in the company’s stock price. At the moment, Tesla is up 4% in the pre-market.

Following the inclusion of the stock of Tesla Inc (NASDAQ: TSLA) to the S&P 500 (INDEXSP: .INX) index as announced back in November, the stock is set to be added to the heavyweight index in a single step. According to CNBC, the one-step addition of Tesla’s stock came following the S&P 500 Dow Jones consultation of investors and the one phased approach is a deviation from the regular phased approach that is usually adopted for such large companies.

Per the report, Tesla’s stock will be added on December 21, just before the day’s trade begins and the addition will be at the company’s full float-adjusted market capitalization. The firm that Tesla will be replacing is not yet known and according to a press release issued by the index, this will be revealed by December 11.

“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 DJI said. The addition of the S&P 500 comes at a time when stock options and stock futures are expiring and the expiration is expected to help facilitate the Tesla stock addition.

Tesla has been tagged as one of the largest stocks to be added to the S&P 500 index who noted that:

“Tesla will be one of the largest weight additions to the S&P 500 in the last decade, and consequently will generate one of the largest funding trades in S&P 500 history. However, Tesla itself is very liquid, and adding the stock at the upcoming December quarterly rebalancing coincides with the expiration of stock options, stock futures, stock-index options, and stock-index futures, which may help facilitate the funding trade.”

Tesla Addition to S&P 500 Is a Testament of the Growth of the Firm

The addition of Tesla to the S&P 500 is akin to the placement of the electric auto maker’s stock to where it rightfully belongs. Since the company was established back on July 1, 2003, it has seen significant growth both in its auto sales, service delivery, as well as the other products and services of Tesla’s subsidiaries.

The growth of Tesla is reflected in the surge in the company’s stock price. At the moment, Tesla is up 4.13% in the pre-market to hit a stock price of $591.02. With the stock seeing about 580% growth thus far this year, with a market capitalization of over $538 billion, the inclusion of Tesla Inc to the S&P DJI is a testament to the stocks’ growth thus far.

Tesla stock inclusion to the S&P 500 will cause a lot of shifts for which the entire investing community will need to be prepared. One of such impacts as noted by Goldman Sachs Group Inc (NYSE: GS) is that Tesla’s addition could result in $8 billion in demand from active US large-cap mutual funds.

Share:

Related Articles