Tesla Set To Join S&P 500 Next Month–And Shares Are Soaring

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Jonathan Ponciano   Forbes U.S. Staff

Tesla Set To Join S&P 500 Next Month–And Shares Are Soaring

Photo: Tesla Twitter 

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 on December 21.

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% in post-market trading at approximately 6:40 p.m. ET; 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.

 

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Jonathan Ponciano   Forbes U.S. Staff

I'm a reporter at Forbes focusing on wealth and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC's Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire.