Tesla is set to join the coveted S&P 500 index by the third week of December. The announcement by S&P Dow Jones Indices (via Reuters) comes three months after the electric car manufacturer first qualified for admission after it strung together four consecutive quarters of profit. The firm now has accrued five consecutive quarters worth of profit, one higher than the requirement of four.
The electric car manufacturer will be admitted to the index following the quarterly rebalancing on December 21, potentially in two tranches, so that it is easier for investment funds to work with. One of the big advantages of joining the S&P 500 index is that it will broaden the investment; investors with index-tracked funds will be forced to buy shares. The announcement came late-Monday, sending Tesla's shares up 13% in after-market trading, effectively adding more than $50 billion to its stock market value.
With a stock market value of over $400 billion, Tesla will be the tenth-most valuable company when it will be added to the market index, narrowly edging out JPMorgan Chase. Furthermore, it will be larger than 95% of the S&P 500’s existing components as well. “(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,” S&P Dow Jones Indices said.
Come December 21, Tesla will rank amongst the heavyweights like Apple, Microsoft, and Amazon. Apple tops the chart and is the only company on it beyond the $2 trillion dollar mark—a feat it achieved two years after it broke through the $1 trillion dollar ceiling. “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," S&P DJI added.