Tesla enters the S&P 500 with 1.69% weighting within the benchmark, fifth largest

Elon Musk, founder of SpaceX and managing director of Tesla Inc., is coming to the Axel Springer awards ceremony in Berlin on December 1st, 2020.

Liesa Johannssen-Koppitz | Bloomberg | Getty Images

Tesla’s inclusion in the S&P 500 will officially be completed on the Monday of the retail opening.

The electric car maker will be weighted 1.69% in the index, the fifth largest. It will be the sixth largest company in the large-cap benchmark when you add up Alphabet’s share classes.

The historic expansion of the S&P 500 bows Tesla’s outstanding 2020. The Elon Musk-led company has posted revenue for five consecutive profitable quarters amid increased demand for electric vehicles. Tesla shares are up more than 730% this year, bringing the company’s market cap to over $ 658 billion. (S&P Dow Jones uses the float-adjusted market value instead of the direct number.)

Tesla’s entry is the largest of all time for the influential stock index and perhaps the most dramatic.

Investors, including passive fund managers and active managers using the S&P 500 as a benchmark, pounced on Tesla stock on the last try, rising nearly 6% on Friday to an all-time high of $ 695 per share shut down . Over 200 million Tesla shares changed hands during this session, more than quadrupling the average trading volume of 30 days.

Tesla is one of the most expensive companies to ever join the S&P 500, with a profit of 186x. However, the impact on the valuation of the benchmark turned out to be less than expected by many. The price / earnings ratio of the S&P 500 for 2021 will increase from 22.3 to 22.6, according to Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices.

With Tesla paying no dividends, the S&P 500’s dividend yield will drop from 1.56% to 1.53%, Silverblatt said.

In terms of the S&P 500’s performance, the high-growth inventory could potentially move the needle. For every Tesla move of $ 11.11, the S&P 500 changes 1 point, according to the index analyst.

Goldman Sachs previously estimated that the total return on the S&P 500 would have been increased 2 percentage points if Tesla had been a year-round component. The S&P 500 is up 14.8% in 2020.

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