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Tesla shares jumped when the carmaker was added to the S&P 500



Elon Musk, head of Tesla, runs to Tesla on the construction site of Tesla Gigafactory. In Grünheide near Berlin, a maximum of 500,000 vehicles per year must leave the assembly line starting in July 2021.

Julian Schale | photo union Getty images

Tesla finally joins the S&P 500.

The S&P Dow Jones indexes announced on Monday that the carmaker will be added to the benchmark index, which was in effect before trading on Monday, December 21

. Based on Monday’s closing prices, Tesla will be one of the 10 most valuable companies in the index.

Tesla shares jumped more than 9% of the news, as money managers with funds tracking the S&P 500 will have to buy shares for their wallets.

The composition of the S&P 500 is determined by what is known as the “Index Committee” in the S&P Dow Jones Indices. Inclusion in the index is based on both quantitative and qualitative factors.

Tesla was expelled in September after meeting the criteria for inclusion in the index, but was not initially selected by the commission.

Companies must be based in the United States and registered with the NYSE, Nasdaq or Cboe. They must also have a market capitalization of more than $ 8.2 billion and account for four consecutive quarters of the profits set by the GAAP.

Even if a company meets these criteria, as well as other conditions, it still does not guarantee inclusion in the index. The committee meets quarterly to balance the index, but companies can be added or removed from S&P at any time. Given the potentially market nature of the additions and deletions from the index, the process is strictly guarded. Even companies that are set to be added do not receive a prior warning.

Tesla recently reported its fifth consecutive quarter of profit. Beating forecasts, the company reported third-quarter revenue of $ 8.77 billion. The company also said it delivered 139,300 vehicles in the third quarter, a new record for Tesla.

But the addition of Tesla is not an easy feat, as the record number of shares has pushed the company’s market value above $ 380 billion, making it the largest company ever added to S&P, according to an analysis by stock research firm Baird.

According to S&P Dow Jones indices, there are more than $ 11.2 trillion in assets compared to the S&P 500, with about $ 4.6 trillion in total indexed funds.

“Due to the large size of the supplement, S&P Dow Jones Indices is seeking feedback by consulting with the investment community to determine whether Tesla should be added at once on the effective date of the rebalance or in two separate tranches ending on the effective date. force of rebalance, “S&P said.

The company that Tesla replaces in the S&P 500 will be announced later.

Jennifer Elias of CNBC contributed to this story.


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