The market capitalization of Tesla rose to $271 billion, making the electric car manufacturer’s most valuable automaker in the world, and on July 22, Tesla reported its fourth straight quarter with a profit. These two facts give Tesla stock a chance at inclusion in the prestigious S&P 500 index, but when can this happen?
Shares of Tesla (TSLA), which showed a record growth in 503,6% over the last year, declined in the last two weeks. After a new record in deliveries and the publication of the fourth consecutive quarter with a profit market analysts and investors evaluate whether grown in market value of the electric car included in the index of the largest value companies in the S&P 500.
Experts note that it is necessary to remember that the changes to the index are made by the selection Committee the S&P 500, and although there are some rules and principles of inclusion, such as profitability, they are only recommendations and can be changed at the discretion of the Committee.
“Unlike most indexes, the S&P 500 is not rigid or absolute rules; the management Committee has certain discretion when choosing stocks or respond to market events,” said former Committee Chairman David Blitzer in his post in 2014.
On this basis, there is no guarantee that this chart will be added to the S&P 500 index this quarter or ever.
There is a possibility that the index, the Committee would prefer to wait until Tesla will show a stable profits for a much longer time.
According to analyst Rob Maurer from TheStreet, who has analyzed the historical changes in the index from 2017, if the Committee really wants to add Tesla stock, it may take from one month to more than 100 days since the publication of the last quarterly report.
On average an ad for inclusion in the S&P 500 index occurred 39 days after their last quarterly or annual reporting. However, since the S&P 500 is a stock index of companies with large capitalization, most companies are not added due to reaching profitability for the first time. As a rule, they are added because their market capitalization has grown so much that justifies their addition.
At the same time, the market capitalization of Tesla is already big enough for a long time, to ensure inclusion. However, if you look at the profitability, over the 10 years of its history as public company (IPO Tesla was held in June 2010), Tesla posted a profit for four consecutive quarters only this year.
If we consider the factor of profitability, the latest example of two companies that were included in the S&P 500 index due to achieve profitability, is an example of Twitter (TWTR) and ServiceNow. The announcement of the inclusion of these companies in the S&P 500 occurred after 32 days and 25 days, respectively, after the filing of the quarterly reports.
The company Tesla published a report of the form “10-Q” for the second quarter July 28. If the use of an example of the on Twitter and ServiceNow, Tesla’s shares may be included in the index around 25 August. Using the average value of all companies, it can be assumed that this could occur around the 4th of September.
The analyst notes that the average announcements for inclusion in the index, indeed, appear shortly before the middle of the quarter, but there are many differences, and, in fact, the ads may appear at any time.
September may be a more likely period for the inclusion of Tesla stock in the S&P 500 because at this time the Committee traditionally holds quarterly meeting on rebalancing the index.
Most likely, based on historical statistics, the day of the week ads is Friday, least Tuesday. As a rule, changes in the index are announced at 17:15 et on the announcement page S&P Global.
Source:
TheStreet
