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Deal
Tesla’s grand entry into the S&P 500 is expected to be preceded by a huge trade, with an unprecedented $ 80 billion in electric car maker stock changing hands at the end of Friday’s session.
A Tesla Supercharger station is seen in Dietikon, Switzerland, on October 21, 2020. REUTERS / Arnd Wiegmann / Files
REUTERS: Tesla’s grand entry into the S&P 500 is expected to be preceded by a huge trade, with an unprecedented $ 80 billion in electric car maker stock changing hands at the end of Friday’s session.
Elon Musk’s Tesla will become the most valuable company ever admitted to Wall Street’s main benchmark on Monday, accounting for more than 1% of the index. The electric car maker’s shares have risen roughly 60% since mid-November, when its debut in the S&P 500 was announced.
Joining the S&P 500 will force index-tracking funds to buy more than $ 80 billion in Tesla shares by the end of Friday’s session so that their portfolios correctly reflect the index, according to S&P Dow Jones Indices. Those funds will have to simultaneously sell the shares of other components of the S&P 500 for the same value.
“Index managers will need to sell a large position in the other components of the S&P 500 to fund the addition of TSLA, which could have a substantial impact on the entire index,” wrote Virtu ITG Canada Head of Indices Research Ivan Cajic, in a report this week.
Actively managed funds that compare their performance to that of the S&P 500, many of which have thus far avoided investing in one of Wall Street’s most controversial stocks, will also be forced to decide whether they own Tesla.
While some investors view Musk as a visionary businessman, others are concerned about missed production targets and corporate governance risk after Musk was forced to resign as president to settle fraud charges in 2018.
Shares of California-based Tesla have risen nearly 700% so far this year, putting its stock market value at more than $ 600 billion and making it the sixth most valuable U.S. company It is publicly traded, and many investors consider it grossly overvalued.
Tesla’s meteoric rise has made it the world’s most valuable auto company despite production being a fraction of rivals such as Toyota Motor, Volkswagen and General Motors.
Tesla is by far the most traded stock by value on Wall Street, with an average value of $ 18 billion of its shares traded in each session for the past 12 months, easily beating Apple, in second place with an average. daily operations of $ 14 billion. according to Refinitiv.
A highly successful quarterly report in July removed a major profitability hurdle that had prevented Tesla from listing on the S&P 500.
About a fifth of Tesla’s shares are held by Musk, the CEO, and other insiders. Since the S&P 500 is weighted by the number of company stocks actually available on the stock market, Tesla’s influence within the benchmark will decline slightly compared to its overall value.
(Report by Noel Randewich; Editing by Ira Iosebashvili, Megan Davies and Ana Nicolaci da Costa)
