The S&P 500 will get a new member in December—but we don’t yet know who will be leaving.
According to S&P Dow Jones Indices, Tesla Inc. will be added to the S&P 500 effective prior to the open of trading on Monday, Dec. 21 to coincide with the December quarterly rebalance.
Tesla will replace a S&P 500 company to be named in a separate press release closer to the rebalance effective date.
Tesla’s addition had been widely anticipated as part of the last quarterly rebalance, but instead Etsy, Teradyne, and Catalent were added to the index, effective on Sept. 21. At the time, analysts said that Tesla wasn’t added due to concerns that its market value was inflated, potentially subjecting the S&P 500 to “potential reputational damage.” Another factor: a lack of consistent profitability, since the S&P 500 requires a year’s worth of positive earnings for a company to be eligible.
Due to the large size of the addition, S&P Dow Jones Indices says it is seeking feedback through a “consultation to the investment community to determine if Tesla should be added all at once on the rebalance effective date or in two separate tranches ending on the rebalance effective date.”
“(Tesla) will be one of the largest weight additions to the S&P 500 in the last decade, and consequently will generate one of the largest funding trades in S&P 500 history,” S&P Dow Jones Indices said, according to Reuters, which also notes that, with a stock market value over $400 billion, Tesla will be among the most valuable companies ever added to the widely followed stock market index—larger than 95% of the S&P 500’s existing components.
