- Tesla is now eligible to be considered for inclusion in the popular S&P 500 index after its successful earnings results.
- On Wednesday, Tesla reported its fourth consecutive quarterly profit, the final milestone it needed to reach for consideration in the index.
- Here’s what happens next, according to the S&P D&Jones.
- See how Tesla operates live on Markets Insider.
- Read more on Business Insider.
On Wednesday, Tesla reported successful second quarter earnings that exceeded Wall Street expectations. They also showed the automaker’s fourth consecutive quarterly profit, the latest milestone it needed to reach to be considered for inclusion in the popular S&P 500 index.
The addition of Tesla to the index is thought by some to be an inevitable conclusion, including Wedbush analyst Daniel Ives, who wrote in a Thursday note that it is “probably a deal done.” But, just meeting the inclusion criteria in the index does not mean that the company will be added.
To be included in the S&P 500, companies must be based in the US, listed on the New York Stock Exchange, Nasdaq or Cboe, have a market capitalization of at least $ 8.2 billion, and report four consecutive quarters of earnings in accordance with generally accepted accounting in the US early (GAAP.)
Now that Tesla has met the S&P 500’s eligibility requirements, it will be added to a pool of other eligible candidates and will be considered for inclusion when an opportunity presents itself, a S&P Dow Jones Indices spokesperson told Business Insider.
Read more: Bernstein says buy these 13 dividend-rich stocks created to capitalize on a trend not seen in 65 years
An opportunity would include if a current S&P 500 company no longer meets the eligibility criteria due to a significant merger, acquisition, or restructuring. Companies can also be removed from the index if they substantially violate one or more of the eligibility criteria, according to S&P.
If such an event arises, a group called the Index Committee will consider several factors when selecting a new member to join the index, including the sector balance and size representation, the company said.
The Index Committee is comprised of full-time professional members of the S&P Dow Jones Index staff. The committee meets monthly and the index is rebalanced quarterly.
However, regardless of this timeline, the committee can add or remove companies at any time, according to the S&P spokesperson. When the committee adds or removes a company, it makes a public announcement that describes the changes.
Adding Tesla to the index could present some unique challenges due to its size. Tesla would be the largest company ever added to the S&P 500, based on its market capitalization of approximately $ 281 billion at the close of the market on Thursday.
Tesla shares have gained more than 260% so far this year.
Market insider information
.
