(Reuters) – Tesla’s grand entry into the S&P 500 is expected to be preceded by a massive transaction, with an unprecedented $ 80 billion worth of shares in the electric carmaker changing hands by the end of Friday’s session.
Elon Musk’s Tesla will become the most valuable company ever admitted to Wall Street’s major benchmark on Monday, accounting for more than 1% of the index. Shares of the electric vehicle manufacturer are up about 60% since mid-November, when its debut in the S&P 500 was announced.
The addition to the S&P 500 will force index-tracking funds to buy more than $ 80 billion worth of Tesla stock by the end of Friday’s session so that their portfolios accurately reflect the index, according to S&P Dow Jones Indices. Those funds will have to simultaneously sell the shares of other S&P 500 members worth the same amount.
“Index managers will have to sell a large position in the other S&P 500 components to fund the addition of TSLA, which could have a significant impact on the entire index,” wrote Ivan Cajic, chief of index research at Virtu ITG Canada. a report this week.
Actively managed funds that compare their performance to the S&P 500, many of which have thus far avoided investing in one of Wall Street’s most controversial stocks, will also have to decide whether or not to own Tesla.
While some investors view Musk as a visionary entrepreneur, others are concerned about missed production goals and the risk of corporate governance after Musk was forced to step down as chairman in 2018 to settle fraud charges.
Shares of California-based Tesla have risen nearly 700% since the start of the year, bringing its stock market value to over $ 600 billion, making it the sixth most valuable publicly traded U.S. company, with many investors classifying it as Consider hugely overrated.
Tesla’s meteoric rise has made it the most valuable car company in the world, despite production being a fraction of rivals such as Toyota Motor, Volkswagen and General Motors.
Tesla is by far the most-traded stock on Wall Street by value, with an average of $ 18 billion in stock exchanged in each session over the past 12 months, easily beating Apple in second place with an average daily trade of $ 14 billion , according to Refinitiv.
A blockbuster quarterly report in July removed a major profitability hurdle that had prevented Tesla’s inclusion in the S&P 500.
About one-fifth of Tesla’s stock is held by Musk, the CEO, and other insiders. Since the S&P 500 is weighted based on the number of shares of companies actually available in the stock market, Tesla’s influence within the benchmark will diminish somewhat compared to total value.
Reporting by Noel Randewich; Edited by Ira Iosebashvili, Megan Davies and Ana Nicolaci da Costa