Written by Norman Isaac Mwambazi

Tesla set to join S&P 500 after posting five consecutive profitable quarters

Billionaire businessman Elon Musk must be smiling from ear to ear after receiving the good news that his company Tesla …

Billionaire businessman Elon Musk must be smiling from ear to ear after receiving the good news that his company Tesla Inc. is set to join the benchmark S&P 500 come this December.

According to an announcement from S&P Dow Jones Indices yesterday Monday, November 16, 2020, the automaker, which is one of the largest companies in the country by market capitalisation will be included on the S&P 500 before the opening of trading on December 21.

The press release from The S&P 500 reads:

“NEW YORK, November 16, 2020: Tesla Inc. (NASD: TSLA) will be added to the S&P 500 effective before the open of trading on Monday, December 21 to coincide with the December quarterly rebalance. Due to the large size of the addition, S&P Dow Jones Indices is seeking feedback through 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. Tesla will replace an S&P 500 company to be named in a separate press release closer to the rebalance effective date.”

This news made Tesla’s shares surge 12% yesterday Monday in extended trade, the company’s stock is now trading at US$445.84 (+9.25%) per share, and still rising.

The inclusion of Tesla on the S&P 500 has also made its Chief Executive Officer (CEO) Elon Musk’s wealth to rocket by 15 billion, and he is now worth a staggering $117 billion as of Monday, November 16, 2020, according to Business Insider. The billionaire is projected to soon overtake Facebook’s Mark Zuckerberg and become the third richest in the world.

Tesla got the green light to join the tech-heavy S&P 500 index after reporting profits in five consecutive quarters, the latest being the company’s Q3 report released in July this year that had investors think it would be added to the index by September. 

With five profitable quarters, the automaker met the requirements for inclusion into the S&P 500, which requires that a company’s last four quarters in summation are profitable and that the previous quarter is profitable.

On October 21, 2020, Tesla’s Q3 2020 results were the company’s best quarterly profit to date, and the fifth consecutive profitable quarter.

With a market capitalisation of $444.70 as of November 17, 2020, Tesla will be the 9th biggest company on the S&P 500, the listing that has the likes of tech giants Apple Inc., Amazon, Alphabet (Google’s parent company), Walmart, Facebook, Microsoft among others leading the way.

About Tesla Inc.

Tesla, Inc., formerly Tesla Motors, Inc., designs, develops, manufactures and sells fully electric vehicles, and energy storage systems, as well as installs, operates and maintains solar and energy storage products.

The Company operates through two segments: Automotive, and Energy generation and storage.

The Automotive segment includes the design, development, manufacturing, and sales of electric vehicles.

The Energy generation and storage segment includes the design, manufacture, installation, and sale or lease of stationary energy storage products and solar energy systems to residential and commercial customers, or sale of electricity generated by its solar energy systems to customers.

Tesla’s products

  • Fully electric vehicles: Model S sedan and Model X sport utility vehicle (SUV). It also offers Model 3, a sedan designed for the mass market.
  • Energy storage products (Tesla batteries) for use in homes, commercial facilities, and utility sites.
  • Solar panels and roofs

Where else is Tesla listed?

The US: Dow Jones, S&P 500 (as of December 21), Nasdaq, S&P/TSX

Europe: FTSE 100 (UK), DAX (Germany), CAC (France)

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.

Tesla’s inclusion in the widely followed stock market index means investment funds indexed to the S&P 500 will have to sell about $51 billion worth of shares of companies already in the S&P 500 and use that money to buy shares of Tesla, so that their portfolios correctly reflect the index, according to S&P Dow Jones Indices. Tesla will account for about one per cent of the index.