Topline
Shares of electric carmaker Tesla are soaring after S&P Global announced Monday after the closing bell that it will add the firm to the S&P 500 Index December 21.
Elon Musk celebrates after the successful launch of the SpaceX Falcon 9 rocket with the manned Crew … [+]
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Key Facts
S&P said it will announce which company Tesla is replacing at a later date.
Shares of Palo Alto, Calif.-based Tesla were surging 13% at approximately 6:40 p.m. ET in post-market trading after ending Monday down 0.1%; shares are now up more than 440% for the year.
Due to Tesla’s large market size, its shares might be added to the S&P in two separate tranches ending on December 21, S&P said in the announcement.
Key Background
The S&P 500 Index rebalances quarterly to capture 500 of the largest industry-leading firms trading publicly in the United States. Index inclusion is a sign of prestige, but it can also help increase demand for a company’s stock given how many index funds track the S&P 500. Many on Wall Street speculated Tesla would be added to the S&P at its last rebalancing in September–and drove up the firm’s stock price in anticipation, but S&P instead ended up adding Etsy, and Tesla shares notably plunged more than 20% in the days after the snub.
Crucial Quote
“Taking a step back, this is a major feather in the cap for the Tesla bulls after much agonizing around not getting into the S&P 500 in early September,” Wedbush analyst Dan Ives said in a note to clients after the announcement, reiterating his neutral rating for Tesla shares and a $500 price target. “We believe the sustained profitability trajectory as evidenced in the September quarter was the final straw that got ‘Musk & Co.’ into the S&P 500 this time around despite all the noise around tax credit boosts on Wall Street.”
Tangent
Founded in 2003 by its now-billionaire CEO Elon Musk, Tesla went public on the Nasdaq exchange in June 2010 at an offering price of $17 per share. Shares closed Monday at about $408.
Further Reading
Elon Musk Set To Receive $2.9 Billion Payday After Tesla Reports Strong Quarter (Forbes)
