This is a groundbreaking announcement and a big achievement by Tesla’s founder and CEO Elon Musk. The company will join the S&P 500 index. You can trade both Tesla stock, which gained 14% yesterday, and SPX500 with SimpleFX Webtrader. The rise in the value of Musk’s company comes from the $51 billion trade by investment funds.
With a capitalization of over $430 billion, the largest automaker in the world, and the top 12 US public companies, it comes as no surprise that the S&P 500 is the right place for Tesla. However now we know the formal date when it is going to happen – December 21.
The trick is in the rules that govern the largest American investment funds. Tesla is big enough to become one of the most significant contributors to the S&P 500 value. The addition itself will be the largest in the decade. At the moment electric car manufacturer’s value is higher than 95% of the index components at the moment.
The above-mentioned bug investment funds are obliged to have a balanced portfolio of the US stock market. As a result, they will have to sell what is estimated to be over $50 billion worth of other S&P 500 stocks, and buy Tesla shares for the same amount.
Tesla stock may go up in the days following the inclusion to the S&P 500. In 1999 we had a similar situation when Yahoo announced it was going to be added to the index. In just five days of trading, the shares went up by 64%. We’ll see if Tesla is repeating this performance or will some big short-sellers benefit from the stock being overpriced.
Trade accordingly. The US stock markets are open already, and Tesla is up again 🙂