Tesla (NASDAQ: TSLA) will be added to the S&P 500 Index at its Full Float Adjusted market cap, instead of in tranches, the S&P Global announced after the market closed on Monday.
Tesla will officially join the S&P 500 Index in one movement, instead of in tranches as the Index stated it was considering before today. After the S&P announced that Tesla would join the Index in mid-November, there was the possibility that it would be added in several tranches. The S&P was seeking feedback through the S&P Dow Jones Indices. It has been determined that Tesla’s massive valuation will not deter the Index from including the electric automaker all at once.
The Index Manager stated:
“S&P Dow Jones Indices (“S&P DJI”) has determined it will add Tesla to the S&P 500 at its full float-adjusted market capitalization weight effective prior to the open of trading on Monday, December 21, 2020.”
$TSLA | S&P Announces Implementation Of Tesla’s Addition To S&P 500
-Will Add Tesla To S&P 500 Prior To Open Dec 21
S&P To Add Tesla At Full Float Adjusted Market Cap Weight
— LiveSquawk (@LiveSquawk) November 30, 2020
The Index will announce which company will leave the S&P 500 on December 11.
The large size of Tesla made its inclusion somewhat complicated. According to CNBC, the S&P also detailed the possibility of TSLA being added in tranches in a statement.
“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.”
However, the Dow Jones Indices stated that it “considered the wide range of responses it received, as well as, among other factors, the expected liquidity of Tesla and the market’s ability to accommodate significant trading volumes on this date.”
On the news of the Full Float Adjusted inclusion, TSLA shares spiked over $22.50, or 4% during after-hours trading. The stock is currently trading at $592.00 in post-market trading at the time of writing.
The addition of Tesla to the S&P will broaden the investor base, according to Bloomberg News. In order to join the index, companies must be based in the United States, and must be listed on the New York Stock Exchange, the NASDAQ, or the CBOE, and have a market capitalization of $8.2 billion or more. Additionally, a company must report four consecutive profitable quarters.
Disclaimer: Joey Klender is a TSLA Shareholder.