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S&P 500 Adds Tesla, Sending Stock Price Soaring;
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S&P 500 adds Tesla, sending stock price soaring; [arstechnica.com]:
Tesla will finally be added to the S&P 500 Index, the committee responsible for the index announced [cnbc.com] after markets closed on Monday. The change will take effect on December 21.
Tesla's stock price jumped 13 percent in after-hours trading on Monday. As I write this just before noon on Tuesday, Tesla's stock has given back some of those gains and is up about 7 percent from Monday's close.
People have trillions of dollars in index funds that track the S&P 500 index. This means that when a stock is added to the S&P 500, fund managers have to add it to their portfolios, pushing up the stock price.
Tesla has been eligible for inclusion in the S&P index since September. The rules require a market capitalization of at least $8 billion—Tesla is above $400 billion—and that a company be profitable, on average, over the four preceding quarters. Tesla has met these criteria since announcing its fourth consecutive profitable quarter [arstechnica.com] in July.
But the committee that chooses stocks for the S&P 500 snubbed Tesla [arstechnica.com] in September. Its stock fell by 15 percent on the news. Then Tesla reported a fifth quarter [arstechnica.com] of profits in October, and now the S&P committee is finally adding Tesla to its index.
According to CNBC, Tesla is the most valuable company ever to be newly added to the S&P 500. Most companies make the list while they are far less valuable. CNBC projects [cnbc.com] that Tesla will be one of the 10 most valuable stocks in the S&P 500.
Tesla's stock price has surged by a factor of five over the course of 2020, making Elon Musk one of the world's richest people. Bloomberg estimates [bloomberg.com] that he is now worth more than $100 billion.
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