Tesla enters the S&P 500 with a weight of 1.69% within the benchmark, the fifth largest

Elon Musk, founder of SpaceX and CEO of Tesla Inc., is coming to the Axel Springer award ceremony in Berlin on December 1, 2020.

Liesa Johannssen-Koppitz | Bloomberg | Getty Images

Tesla’s inclusion in the S&P 500 will officially be completed on the Monday of the trade opening.

The electric car manufacturer will be weighted at 1.69% in the index, the fifth largest. It will be the sixth largest company in the large-cap benchmark when you add up Alphabet’s share classes.

The historic expansion of the S&P 500 bowed to Tesla’s stellar 2020. The Elon Musk-led company has posted revenue for five consecutive profitable quarters due to increased demand for electric vehicles. Tesla shares are up more than 730% this year, bringing the company’s market cap to over $ 658 billion. (S&P Dow Jones uses the float-adjusted market value instead of the direct number.)

Tesla’s entry is the largest of all time for the influential stock index and perhaps the most dramatic.

Investors, including passive fund managers and active managers using the S&P 500 as a benchmark, got into Tesla stock on the last try, pushing the stock down nearly 6% on Friday to close at an all-time high of $ 695 per share . Over 200 million Tesla shares changed hands during this session, more than quadrupling the average trading volume of 30 days.

With a 186x time gain, Tesla is also one of the most expensive companies to ever join the S&P 500. However, the impact on the valuation of the benchmark was less than expected by many. The price-earnings ratio of the S&P 500 for 2021 will increase from 22.3 to 22.6, according to Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices.

With Tesla paying no dividends, the S&P 500’s dividend yield will drop from 1.56% to 1.53%, Silverblatt said.

In terms of the S&P 500’s performance, the high-growth inventory could potentially move the needle. For every Tesla move of $ 11.11, the S&P 500 changes 1 point, according to the index analyst.

Goldman Sachs previously estimated that the total return on the S&P 500 would have been increased 2 percentage points if Tesla had been a year-round component. The S&P 500 is up 14.8% in 2020.

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