Tesla (TSLA) Sneaks Into the S&P 500

Two months after Tesla's much-hyped inclusion in the S&P 500 failed to materialize, the index quietly added the EV maker to its ranks.

Tesla sedans in front of a Tesla sign
(Image credit: Getty Images)

From the Department of What Took Them So Long, we learned late Monday that Tesla (TSLA (opens in new tab), $408.09) will be added to the S&P 500 Index in December.

And it's going to be a lot for the market to swallow.

With a market value of more than $400 billion, Tesla is going to roil trading in index funds, as billions of dollars are reallocated to reflect the electric vehicle and storage maker's weight in the index.

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Funds indexed to the S&P 500 will have to sell about $151 billion in shares in other S&P 500 companies and use those funds to buy TSLA stock. When the inclusion is settled, Tesla will account for about 1% of the S&P 500 and be among the top 10 most influential stocks in the market-cap weighted broad market index.

"(Tesla) will be one of the largest weight additions to the S&P 500 in the last decade, and consequently will generate one of the largest funding trades in S&P 500 history," S&P Dow Jones Indices said.

To that end, Standard & Poor's has said it is weighing conducting Tesla's inclusion in two tranches to help the market digest the enormous move.

Wall Street Cheers Tesla's S&P 500 Inclusion

TSLA stock would join the S&P 500 prior to the opening of trading on Dec. 21, S&P Dow Jones Indices says.

Investors have been anticipating the Tesla index news for a while. It felt like only a matter of time before TSLA was added to the most widely used benchmark of U.S. equity performance. In fact, investors were surprised that Tesla wasn't tapped for inclusion in September after it met the requirement of posting four consecutive quarters of profit.

That made Monday's announcement something of a small surprise, albeit a welcome one.

TSLA stock naturally rallied on the news as investors anticipated a rush of demand from funds, given $11.2 trillion indexed or benchmarked to the S&P 500. Shares popped more than 12% at Tuesday's opening bell.

The stock has been notoriously volatile over the years. Most recently, shares tanked by about 34% during the first week of September, shortly after the stock peaked following its 5-for-1 stock split.

But with TSLA stock up about 388% for the year-to-date, not even counting Tuesday's post-inclusion bump, no one's complaining.

Tesla founder and CEO Elon Musk's personal net worth jumped by more than $7 billion on the news to $98 billion, according to Forbes. He now lags only Amazon.com (AMZN (opens in new tab)) CEO Jeff Bezos, LVMH (LVMUY (opens in new tab)) CEO Bernard Arnault, Microsoft (MSFT (opens in new tab)) co-founder Bill Gates and Facebook (FB (opens in new tab)) CEO Mark Zuckerberg for the title of richest person in the world.

Dan Burrows
Senior Investing Writer, Kiplinger.com

Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.

A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics and more.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.