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Topline
Shares of electric carmaker Tesla soared after S&P Global announced Monday after the closing bell that it will add the firm to the S&P 500 Index on December 21, boosting the fortune of the firm’s billionaire founder and CEO, Elon Musk.
Elon Musk celebrates after the successful launch of the SpaceX Falcon 9 rocket with the manned Crew … [+]
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Key Facts
Shares of Palo Alto, Calif.-based Tesla climbed more than 8% on Tuesday, bringing the stock’s year-to-date gains up to a massive 410%.
The 49-year-old, who owns 21% of Tesla shares but has pledged a majority of his stake as loan collateral, is now worth an estimated $97 billion.
S&P said it will announce which company Tesla is replacing at a later date.
Due to Tesla’s large market size, its shares might be added to the S&P in two separate tranches ending on December 21, S&P said in the announcement.
Key Background
The S&P 500 Index rebalances quarterly to capture 500 of the largest industry-leading firms trading publicly in the United States. Index inclusion is a sign of prestige, but it can also help increase demand for a company’s stock given how many index funds track the S&P 500. Many on Wall Street speculated Tesla would be added to the S&P at its last rebalancing in September–and drove up the firm’s stock price in anticipation, making Musk a centibillionaire–briefly–this summer. S&P, however, ended up adding Etsy to the index instead, and Tesla shares notably plunged more than 20% in the days after the snub.
Crucial Quote
“Taking a step back, this is a major feather in the cap for the Tesla bulls after much agonizing around not getting into the S&P 500 in early September,” Wedbush analyst Dan Ives said in a note to clients after the announcement, reiterating his neutral rating for Tesla shares and a $500 price target. “We believe the sustained profitability trajectory as evidenced in the September quarter was the final straw that got ‘Musk & Co.’ into the S&P 500 this time around despite all the noise around tax credit boosts on Wall Street.”
Tangent
Founded in 2003, Tesla went public on the Nasdaq exchange in June 2010 at an offering price of $17 per share. Shares closed Monday at about $408.
Further Reading
Elon Musk Set To Receive $2.9 Billion Payday After Tesla Reports Strong Quarter (Forbes)