Tesla will join the S&P 500 index in December after reporting five consecutive quarterly profits.
"Tesla Inc. (NASD:TSLA) will be added to the S&P 500 effective prior to the open of trading on Monday, December 21 to coincide with the December quarterly rebalance," S&P Dow Jones Indices said in a press release.
"Due to the large size of the addition, S&P Dow Jones Indices 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 replace a S&P 500 company to be named in a separate press release closer to the rebalance effective date."
The carmaker's shares surged 10 percent on the news after gaining as much as 400 percent since the start of the year, mostly thanks to strong sales and the resulting positive net quarterly earnings.
"It's the cherry on top of a very successful year for Musk," Toni Sacconaghi, an analyst with Bernstein Research, told the Wall Street Journal. "It's probably the ultimate symbolic vindication for Elon Musk that he is being recognized by this significant financial index."
CNN notes that the requirements for a company to join the S&P 500 include a market capitalization of at least $8.2 billion and having at least 50 percent of its shares available to the public. Tesla has a market cap of close to $387 billion.
"Clearly this is a key positive for shares and indexing purposes and ultimately removes another question mark around the Tesla story going forward," analysts from Wedbush wrote in a note to clients, as quoted by CNN.
Of course, skeptics remain skeptical. "S&P is making a big mistake and adding lots of downside risk to the index by including Tesla," David Trainer from New Constructs told the WSJ. "I think Tesla's addition to the S&P 500 might be a catalyst for a lot of large investors to dump the stock and take gains."
Interestingly enough, China is one of Tesla's strongest markets, despite local competition.
By Charles Kennedy for Oilprice.com
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