S&P 500 to swallow Tesla in one gulp on Dec. 21; shares keep on surging

Tesla’s plant in Germany takes shape. (Getty Images)

Tesla shares jumped 4% in extended trade on Monday after S&P Dow Jones Indices said hello would add one of Wall Street’s most valuable companies to the S&P 500 index all at one time on Dec. 21.

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

The electric car maker’s stock has surged over 40% since Nov. 16, if this was announced Tesla would join the index.

At that point, S&P Dow Jones Indices said it would consult investors about whether or not to potentially add Tesla in two tranches a week apart to help make the addition easier to handle for index funds.

“In its decision, S&P DJI considered the wide range of responses it received, in addition to, among additional factors, the expected liquidity of Tesla and the market's ability to accommodate significant trading volumes about this date,” S&P Dow Jones Indices said inside a media statement.

With a stock market price around $550 billion, Tesla is going to be one of the most valuable companies ever put into the index. Tesla will take into account just over 1% of the S&P 500.

Up about 600% in 2021, the California-based car maker is just about the most valuable auto company in the world, by far, despite production that's a fraction of rivals for example Toyota Motor, Volkswagen and Vehicle.

A blockbuster quarterly report in July cleared a significant hurdle associated with profitability that had prevented Tesla’s inclusion within the S&P 500.

About a fifth of Tesla’s shares are closely held by Musk, the main executive, along with other insiders. Because the S&P 500 is weighted through the amount of companies’ shares actually available on the stock market, Tesla’s influence inside the benchmark will be slightly diminished, putting it at around seventh place, currently held by Johnson & Johnson.

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