Tesla joins S&P 500

After reporting five consecutive quarterly profits, Tesla Motors has become the latest addition to the S&P 500 index.

Julia La Roche from Yahoo Finance reported:

Shares of Tesla (TSLA) jumped more than 10% in the after-hours session on the news that the electric carmaker is set to join the S&P 500.

On Monday evening, the S&P Dow Jones Indices announced that Tesla will be added to the closely-followed stock index on Monday, Dec. 21 before the market opens to coincide with the December quarterly rebalance.

Reuters’ Noel Randewich wrote:

With a stock market value over $400 billion, Tesla will be among the most valuable companies ever added to the widely followed stock market index, larger than 95% of the S&P 500’s existing components.

Its inclusion means investment funds indexed to the S&P 500 will have to sell about $51 billion worth of shares of companies already in the S&P 500 and use that money to buy shares of Tesla, so that their portfolios correctly reflect the index, according to S&P Dow Jones Indices. Tesla will account for about 1% of the index.

Kirsten Korosec from TechCrunch reported:

Joining the S&P 500 has its benefits, as investors that have index-tracked funds will be forced to buy shares. With share prices already popping, that will mean investors will have to sell other stocks to make room for Tesla. Existing investors may, in turn, want to take advantage of that demand and sell. The upshot: The traditionally volatile stock might get a bit more volatile.