Tesla’s entrance into the S&P 500 index on Monday (December 21) is expected to be preceded by a huge trade, with an unprecedented $80 billion of the electric car maker’s stock changing hands by the end of the session on Friday.
The electric car maker is about to become the most valuable company ever admitted to Wall Street’s main benchmark, accounting for over 1% of the S&P 500 index’s value. The electric car maker’s shares have surged about 60% since mid-November, when its debut in the S&P 500 was first announced.
Addition to the S&P 500 will force index-tracking funds to buy over $80 billion worth of Tesla shares by the end of Friday’s session so their portfolios correctly reflect the index, according to S&P Dow Jones Indices. Those funds will simultaneously have to sell other S&P 500 constituents’ shares worth the same amount.
Actively managed funds that benchmark their performance against the S&P 500, many of which until now have avoided investing in one of Wall Street’s most controversial stocks, will also be forced to decide whether to own Tesla.
California-based Tesla’s stock has surged almost 700% year-to-date, putting its stock market value at over $600 billion and making it the sixth most valuable publicly listed U.S. company, with many investors viewing it as wildly overvalued.
Tesla’s meteoric rise has made it the most valuable auto company in the world despite production that is a fraction of rivals such as Toyota (NYSE:TM), Volkswagen and General Motors (NYSE:GM)
Tesla is by far the most traded stock by value on Wall Street, with $18 billion worth of its shares exchanged on average in each trading session over the past 12 months, easily beating Apple, in second place with average daily trades of $14 billion, according to Refinitiv Data.
