Tesla shares surge as car maker gains entry to S&P 500

NEW YORK: Electric car manufacturer Tesla (TLSA.O) is to be added to the S&P 500 on December 21, when the index next rebalances. 

Shares in the Palo Alto, California-based firm jumped 13.4% to $462.69 in after hours trading following the announcement from S&P Dow Jones Indices.

With a market capitalization of $389bn, Tesla will be the largest ever new entrant to the index. Due to its size, S&P has launched a consultation on whether the automaker should be added all at once when the index rebalances for the fourth quarter of 2020, or in two separate tranches.

Either way, Tesla will be part of the index by December 21, where it will have a weighting of 1.01%, not far off those of Nvidia (NVDA.O), JPMorgan Chase (JPM.N), and Visa (V.N), and well ahead of household names like Walt Disney (DIS.N), Pfizer (PFE.N), and Netflix (NFLX.O).

To be included in the index, companies must have a market capitalization of at least $8.2bn and have posted a cumulative profit over four consecutive quarters, with the most recent quarter in the black, among other criteria. Tesla is on a run of five profitable quarters but missed out on being included in the index in September, the last time the S&P rebalanced. Inclusion in the S&P is at the discretion of the index’s committee. 

Shares in Tesla are up a staggering 374% this year, making it the world’s largest automaker by market cap.

In joining the S&P 500, Tesla will replace another company, which will be named by S&P nearer to the date of the rebalance, the index provider said.

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Tesla, and its chief executive Elon Musk, divide investor opinion, with the company’s stock the most shorted in the US market.

However, a number of high-profile fund managers have been long-term backers of the automaker, including Baillie Gifford in the UK, which ranks as the company’s fourth largest shareholder.

Baillie Gifford holds 3.7% of Tesla’s shares worth $15.9bn (£11.9bn), having cut its stake in recent months as the shares’ rally has pushed its holding past fund concentration thresholds.

The Edinburgh-based fund firm’s £15bn Scottish Mortgage (SMT) investment trust accounts for a large proportion of that holding, with a stake accounting for 12% of its portfolio at the end of September, according to the latest factsheet.

The open-ended £5.3bn Baillie Gifford American fund is also a major investor, with a stake accounting for 8.6% of the portfolio at the end of September, while the £4.3bn Baillie Gifford Long Term Global Growth fund has an 8.4% portfolio stake.



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