In this news, we discuss the Tesla value jumps $40 billion as S&P 500 beckons.
(Reuters) – Shares of Tesla Inc rose 12% on Tuesday, adding more than $ 40 billion to the value of the electric automaker and boosting the fortune of billionaire CEO Elon Musk.
The S&P Dow Jones Indices confirmed Monday after the markets closed that the company will be added to the main Wall Street index from December 21, triggering a major reorganization of investment funds that track the basket of stocks.
At $ 400 billion or more, Tesla’s market cap is expected to represent more than 1% of the total value of companies listed on the S&P 500, potentially making it the biggest addition to the index.
S&P DJI said on Monday that the addition would require funds that track the index to sell about $ 51 billion of shares from their current holdings to buy Tesla shares and rebalance their portfolios in line with the index.
“One of the potential obstacles to adding Tesla to the S&P was the high share price,” Credit Suisse analyst Dan Levy wrote in a note. “The recent drop in the stock offers a better opportunity for index trackers to build positions.”
Shares of the automaker, which have more than quintupled this year, rose 11% to $ 453.42, and it was the eighth most-traded share, shortly after it opened in New York.
That valued Tesla at around $ 430 billion, more than the entire S&P earned on Monday after news of successful COVID-19 vaccine trial data from Moderna Inc. emerged.
Supported by a decade of stock market gains, the combined market cap of the S&P 500 now stands at nearly $ 32 trillion, and data from the S&P DJI earlier this year showed investments indexed to it to reach 4.6 trillion. of dollars.
Traders and analysts said the rush to add Tesla next month could lead to more speculative buying.
In 1999, Yahoo jumped 64% in the five trading days between announcing its addition to the index and its inclusion. Yahoo’s market capitalization at the time was only $ 56 billion.
“The 12% move is probably more than anything else,” said Mark Taylor, salesperson at Mirabaud Securities, London.
“I believe in letting the dust settle for a few days and see how things go in terms of how much follow-up money has been spent.”
Reporting by Subrat Patnaik, Sruthi Shankar in Bengaluru and Noel Randewich in San Francisco; edited by Patrick Graham
Original © Thomson Reuters