Tesla (TSLA) Sneaks Into the S&P 500

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From the Department of What Took Them So Long, we learned late Monday that Tesla (TSLA, $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.

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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.

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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) CEO Jeff Bezos, LVMH (LVMUY) CEO Bernard Arnault, Microsoft (MSFT) co-founder Bill Gates and Facebook (FB) CEO Mark Zuckerberg for the title of richest person in the world.

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

A long-time financial journalist, Dan is a veteran of MarketWatch, CBS MoneyWatch, SmartMoney, InvestorPlace, DailyFinance and other tier 1 national publications. He has written for The Wall Street Journal, Bloomberg and Consumer Reports and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among many other outlets. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange.

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 markets and macroeconomics.

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

Disclosure: Dan does not trade individual stocks or securities. He is eternally long the U.S equity market, primarily through tax-advantaged accounts.