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Tesla hits record highs ahead of its inclusion in S&P 500

"Shares of Tesla are up 684% year-to-date as of Thursday's close"

 

Tesla gained as much as 4% and hit all-time-highs on Friday ahead of its unprecedented inclusion into the S&P 500 index.


The electric vehicle manufacturer will be snapped up by index funds throughout the day on Friday as the S&P 500's inclusion of Tesla is made effective before the market open on Monday.

With a market value of nearly $650 billion as of Friday morning, Tesla will be the largest company ever added to the popular stock market index. The company will account for more than 1% of the index and will be the 6th largest company in it, ahead of Berkshire Hathaway and behind Facebook.

Tesla became eligible to be added into the index earlier this year after it posted its fourth straight quarter of profits, in part fueled by its sale of regulatory credits to other automakers who don't yet produce enough EV cars on an annual basis to hit government requirements.


With more than $10 trillion either indexed or benchmarked to the S&P 500, a buying spree of about $80 billion in Tesla shares will occur throughout the day on Friday, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.


"Historically, the $21 billion trading for fourth-quarter rebalancing is minor league, but when you add in heavy-hitter Tesla, $82 billion, you end up doubling the historical high, surpassing the $100 billion mark," Silverblatt said, as reported by the Associated Press.


Tesla is expected to account for 1.5% or 1.6% of the S&P 500, well ahead of its automaker competitors Ford and General Motors, which account for 0.12% and 0.17% of the index, respectively. Apple is currently the largest holding in the S&P 500, with a weighting of about 6.5%.


There should be plenty of liquidity to absorb the buying pressure in Tesla on Friday, as the rebalancing day coincides with quadruple witching, or the day that options and futures on both indexes and stocks expire simultaneously. This typically generates heavy trading volumes which can boost liquidity.


Shares of Tesla are up 684% year-to-date as of Thursday's close, while the S&P 500 is up 15% over the same period.

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