All Tesla shares will be added to S at a time&P 500 before the opening of trading on December 21
Tesla Shares Will Be Added To S&The P 500 in one step, despite the company’s market cap of over $ 500 billion, said S&P Dow Jones Indices, abandoning a possible phased approach that was believed to mitigate the impact of adding such a large company to a US stock benchmark.
Shares will be added at full float-adjusted market cap prior to trading on December 21.
Floating correction means that only publicly available shares are taken into account in assessing company weight. Tesla’s replacement company to be named December 11.
This decision followed a response from the investment community, which was approached by representatives of S&P Dow Jones Indices due to the difficulty of adding a Tesla-sized company. Electric vehicle maker to be largest company ever added to S&P 500.
S&P Dow Jones Indices Announce Tesla Joining S&P 500 earlier in November, before that, the question of whether Tesla shares should be added at the same time before the market opens on December 21 or in two tranches on December 14 and 21 was considered..
«In its solution S&P DJI took into account the wide range of responses received, as well as, among other things, the expected liquidity of Tesla and the market’s ability to withstand significant trading volumes on that date.», – stated in a press release index provider. Adding Tesla to S&The P 500 will coincide with the expiration of stock options and stock futures as well as other financial instruments, which should help ease the addition due to the high trading volume that day.
According to Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, Tesla Floating-Adjusted Market Value of $ 437 Billion Will Lead to $ 72.7 Billion in Necessary Trades for Benchmark ETF Managers Beyond Normal Trading Activity Dec 21.
Tesla will join the S&P 500 effective prior to trading on Dec. 21
«The fact that when S&P originally made the announcement, they asked for feedback from the investment community on how to proceed with the addition, tells us how unique this situation is», – noted the founder of Bespoke Investment Group Paul Hickey.
Tesla shares jumped nearly 40% since joining the index, bringing them almost 580% year-over-year.
Hickey attributed the recent rally in stocks to the expectation that capital managers would have to buy the stock.
According to the index S&P Dow Jones, there is currently over $ 11.2 trillion in S-index-matched assets&P 500, of which approximately $ 4.6 trillion are indexed funds.
«There are a lot of changes to make to make room for something as big as the Tesla’s plug-in, so we’re going to have to digest a lot of moving parts.», – said Stephanie Hill, Head of Index at Mellon. Hill, who oversees about $ 350 billion, shared her opinion on the two options presented by S&P Dow Jones Indices. She estimates Tesla’s addition in one tranche makes more sense given the added market activity on December 21..
Goldman Sachs recently calculated that the addition of Tesla could trigger $ 8 billion in demand from active US large-cap mutual funds. When index funds are added, this figure will grow significantly.
Inclusion of the company in the S index&The P 500 was considered a foregone conclusion after Tesla posted a fourth straight quarter of earnings in July, which has so far been the company’s latest setback. However, the company was spared during the September quarterly rebalancing of S&P 500, causing the stock to drop for a while.
S Roster&P 500 is defined by the so-called «index committee» S&P Dow Jones Indices, which analyzes both quantitative and qualitative factors. Ultimately, the index is designed to reflect the US market as a whole..
Tesla Shares Up More Than 4% In Extended Trading Following This Announcement.