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Tesla Joining the S&P 500 In One Tranche

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The S&P Dow Jones Indices (S&P DJI) has confirmed that it will add Tesla stock at its full weighting. The index manager has thus opted against adding Tesla in tranches after consulting with investors.

How Was Tesla Supposed to Integrate the S&P 500?

Tesla will be the most valuable company to ever be added to the S&P 500.

The S&P DJI released a press statement yesterday that stated the following:

“Due to the large size of the addition, S&P Dow Jones indices is seeking feedback through a consultation to the investment community if Tesla should be added all at once on the rebalance effective date or in two separate tranches ending on the rebalance effective date.”

It was widely speculated that due to Tesla’s massive market capitalization, its stock will not be added all at once. 

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S&P Dow Jones Indices’ Latest Press Release

On November 30, the S&P DJI issued another press release that announced the following:

“S&P Dow Jones Indices has determined it will add Tesla to the S&P 500 at its full float-adjusted market capitalization weight effective prior to the open of trading on Monday, December 21, 2020. S&P DJI considered the wide range of responses it received, as well as, among other factors, the expected liquidity of Tesla and the market’s ability to accommodate significant trading volumes on this date.”

Float-adjusted means that only shares available to trade by the public are considered when evaluating a company’s weighting. The index manager will also announce which company will depart the S&P 500 to make room for Tesla on December 11. 

Tesla shares spiked approximately 5% in after-hours trading on Monday after the announcement. At the time of writing this article, Tesla shares were trading at $567.60 per.

Tesla’s on December 1, at 8:27 a.m. Eastern – Image Source: Google
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2020: A Year That Will Live in Remembrance for Tesla

Tesla’s valuation in mid-January was approximately $100 billion. It took the company 111 days to go from $100 to $200 billion by the end of June. In mid-July, Tesla’s market cap surpassed the $300 billion threshold. The company hit the $400 billion-mark in August.  

The automaker was initially slated to integrate the S&P 500 index last September. Tesla was surprisingly snubbed for unknown reasons.

On Monday, November 16th, the S&P DJI announced that Tesla will be added to the benchmark index on Monday, December 21st. Last Tuesday, the company’s market cap topped $500 billion, and is currently valued at  around $551 billion.

If Tesla was to integrate the S&P 500 today, it would be the sixth largest company on the index by market value. 

All in all, the company’s stock price soared to unprecedented heights in 2020. It is primarily due to Tesla’s cutting-edge EV technology, battery improvements, and overall increase in production and delivery outputs. 

Investors are set to benefit greatly from Tesla’s inclusion in the S&P 500.

Once Tesla joins the S&P 500 on December 21, how much will the company’s stock price increase? What is your price target? Please let us know in the comments down below!


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