Tesla has met all conditions for entering the S&P 500 Index
Tesla company has been showing profit growth for five consecutive quarters. It managed to survive the difficult periods of pandemic and crisis, which is not the case with a number of other car manufacturers. In addition, sales volumes of electric cars continue to grow, which is due, among other things, to environmental initiatives to reduce carbon emissions into the atmosphere.
The high performance over five quarters gives Elon Musk an opportunity to enter the S&P 500 index. This event is significant for Tesla as it makes it one of the leaders in the global automotive industry. In addition, the transition of the corporation in the category of “blue chips” translates its shares into institutional, which will make the developer of electric cars even more attractive to investors.
As soon as Tesla enters the S&P 500, funds that work with this index and companies from it will need to analyze their portfolios and make changes to them. To do this, the investment funds will have to sell some of the shares that are already in the S&P 500, the amount will be about $51 billion. These funds will be used to purchase Tesla securities, which will lead to higher quotations.
The history of Elon Musk Corporation is a constant struggle and breaking stereotypes, which symbolizes Wall Street. The manufacturer of electric cars has been trying for a long time to overcome problems and increase financial flows, and it seems that he is doing a great job. As soon as it became known that Tesla shares were included in the S&P 500, they rose in price by 13% and quotations by 10%.
The stock index list includes the securities of 505 companies, which are represented on the U.S. stock exchanges. The main requirements for joining the S&P 500 are the amount of market capitalization of at least $8.2 billion and high profit, which is fixed for five quarters. Besides, the company must have high liquidity, and 50% or more of its shares must be in public circulation.
Tesla’s market capitalization is $386.82 billion, which has increased by 400% since the beginning of last year. This makes the company with the largest capitalization ever on the index list. It is likely that the entry procedure will be done in parts. Tesla will take the lead on the S&P 500 list as the company with the greatest weight. In addition to the American car manufacturer, Johnson & Johnson, Berkshire Hathaway and Procter & Gamble have this status.
However, not all experts agree with the addition of Tesla to the index. Some believe that such changes increase the risk of reducing the S&P 500.