Tesla will eventually be added to the S&P 500 index, the committee responsible for the index announced after the market closed on Monday. The change will take effect on December 21.
Tesla’s stock price jumped 13 percent in after-hours trading on Thursday. As I wrote before noon on Tuesday, Tesla’s stock has given back some of those gains and is up 7 percent from Thursday’s close.
People have trillions of dollars in index funds that track the S&P 500 index. This means that when a stock is added to the S&P 500, fund managers have to add it to their portfolio, increasing the share price.
Tesla has been eligible for inclusion in the S&P index since September. The regulations require a market capitalization of at least $ 8 billion – Tesla tops $ 400 billion – and that a company is profitable, on average, in four preceding quarters. Tesla has met these criteria since announcing its fourth consecutive profitable quarter in July.
But the committee selecting shares for the S&P 500 turned down Tesla in September. Its stock fell 15 percent on the news. Tesla then reported a fifth-quarter profit in October and now the S&P committee is finally including Tesla in its index.
According to CNBC, Tesla is by far the most valuable company to join the S&P 500. Most companies make the list while they are worth very little. CNBC projects that Tesla will be one of the 10 most valuable shares of the S&P 500.
Tesla’s share price has increased by more than five during 2020, making Elon Musk one of the richest people in the world. Bloomberg estimates that he is now worth more than $ 100 billion.