Tesla has achieved yet another feat on the S&P 500, confirming its addition to the Index starting December 21, 2020. The addition will cap a stellar year for the electric car giant that has taken the auto and tech industry by storm in one of the most challenging environments. The stock rallied by more than 10% on the announcement as money managers with funds that track the S&P 500 rushed to buy the stock for their portfolios.
S&P 500 Addition
With the addition, Tesla joins an exclusive club of ten of the most valuable companies in the index. The addition comes hot on the heels of one of the hottest record run that has seen the company’s market cap pushed to record highs of $380 billion. Being the most valuable auto company, it is also the largest company added in the S&P 500.
Tesla joins the S&P 500 index after turning in profits in five consecutive quarters. The index committee only adds stocks of companies that have posted four-straight quarters of profits. The electric car giant is fresh from delivering a record number of cars in a quarter at 139,300, leading to $8.77 billion in revenues.
Tesla’s addition takes S&P 500 benchmarked assets to over $11.2 trillion with $4.6 trillion in indexed funds. Given Tesla’s size, the S&P 500 committee is seeking feedback on whether to add the stock all at once or in two separate tranches.
For Elon Musk, the charismatic founder and CEO, the addition is yet another historic milestone as a year back, the company was making losses. However, 2020 has turned out to be Tesla’s year even as other automakers crumbled amid the COVID-19 pandemic.
The stock has more than doubled, prompting a 5-for-1 split in August, in a bid to make the stock affordable for the masses. Its addition to the S&P 500 affirms the sustained profit trajectory likely to continue as focus shifts to electric cars worldwide.
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