In a major achievement for founder and chief executive Elon Musk, S&P Dow Jones Indices announced overnight that the California-based company will join the prestigious index prior to the opening of trading on December 21.
With a market capitalisation of over US$380bn, making Tesla the largest company ever added to the S&P 500, the index administrator said the move may have to be made in two tranches so that index-tracking investment funds can cope.
As the S&P 500 tracking funds are forced to buy shares in the carmaker and sell other an estimated US$40-50bn shares of other companies to balance the index, with Tesla representing around 1% of the total.
The S&P Dow Jones Indices committee is seeking feedback from the investors on whether to add it in two separate tranches.
“(Tesla) will be one of the largest weight additions to the S&P 500 in the last decade, and consequently will generate one of the largest funding trades in S&P 500 history,” it said.
The company that Tesla will replace has not yet been named.
The promotion was expected by many in October as Tesla had seemed to tick all the necessary boxes for inclusion in the index, but the company has since made the case clearer by turning a profit for the fifth quarter in succession.
Stock surge makes Musk third-richest human
Shares of Tesla have shot up 13% in pre-market trading on Tuesday to US$458.99, which compares to a price in November last year of US$70.
This will inflate the personal fortune of Musk, who owns 20% of the company, by more than $15bn (GBP11.3bn).
This will mean he will become the world’s third-richest person, with a net worth rose to $117.5bn, according to the Bloomberg Billionaires Index.
It has been an eventful week for the South Africa-born billionaire, who was diagnosed as suffering from a mild case of COVID-19, while his other company, SpaceX, successfully carried four NASA astronauts to the International Station Station as part of its first full operational mission.
After being launched into orbit from Kennedy Space Center in Florida by the company’s Falcon 9 rocket, SpaceX’s Dragon spacecraft then linked up with the ISS last night.