The index Committee S&P Dow Jones Indice decided about adding Tesla stock to the S&P 500 one phase after consultations with investors. Adding force index funds to buy these shares in the amount of about $73 billion.
Tesla’s shares (TSLA) rose 5% during trading on Tuesday after the index Committee S&P Dow Jones Indice announced Monday that they will be added to the S&P 500 index one step before the opening of trading on December 21. The other positive news Monday for Tesla was the approval of the Chinese authorities at the beginning of its Shanghai sales of the SUV Model Y.
Because Tesla will be the biggest company ever added to the S&P 500, the Committee consulted with investors to make the decision whether or not adding one or two stages.
The founder of the Bespoke Investment Group’s Paul Hickey said that the Committee “is telling about how unique this situation is.”
“In its decision, S&P DJI has taken into account a wide range of responses received, as well as, among other things, the anticipated liquidity of Tesla and the market’s ability to withstand significant volume of trading on that date,” said provider index.
According to the report, the Committee will call the company that will replace Tesla on December 11.
S&P DJI also noted that the addition of Tesla stock the most popular index of wall street make index funds to buy them for about $73 billion to their portfolios. This will force managers of the index funds to sell shares of other companies, causing volatile trade.
“We will have to spend a lot of changes to make room for something as big as the inclusion of Tesla,” said Stephanie hill, head of index Mellon.
For its part, Goldman Sachs experts recently said that adding Tesla to the S&P 500 may lead to demand $8 billion from active U.S. mutual funds large cap stocks, but when you consider index funds, this figure will be much higher.
Tesla stock rose sharply by almost 40% in two weeks since the announcement about adding companies to the index. At the moment Tesla is the most expensive car company on the market, with a market capitalization of $527 billion Is higher than the market valuation of Toyota Motor, Volkswagen and General Motors combined, although the production of Tesla is only a small part of these competitors. In the list of the largest companies in the S&P 500 Tesla may take place between Berkshire Hathaway and Visa (V).
To add a company Tesla to the index in the traditional way “is simple and easy to understand,” said Gary black, a private investor who was the Executive Director of Aegon Asset Management from mid-2016 to September.
According to black, after the initial purchase of Tesla to include December 21, the stock may drop, if we judge by history. Shares could fall by about 10-20%, which is consistent with what happened with Facebook (FB) after the stock was added to the S&P 500 seven years ago.
