Tesla leaps ahead of its upcoming inclusion in the S&P 500 – here’s what that means for the stock

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(This story is for CNBC PRO subscribers only.)Tesla shares surged Tuesday after S&P Dow Jones Indices announced that the company would join the S&P 500 – a historic milestone for Elon Musk and his electric vehicle company, and which will also lead to billions of dollars in Tesla shares which will change hands. index managers buy the stock.

“We expect TSLA stocks to trade significantly more on the news,” said Garrett Nelson, analyst at research firm CFRA. Tesla jumped more than 12% early in Tuesday, adding more than $ 30 billion to its market cap at the opening bell.

Based on Tesla’s size – at its current valuation, it will be among the 10 largest companies in the S&P – Credit Suisse estimates that passive funds will need to purchase around 95 million shares, with active managers bringing the total to around 125 million shares. This means significant sales in other positions, to the tune of around $ 51 billion, according to S&P Dow Jones Indices, which said the addition of Tesla “will generate one of the largest financing deals in the world. history of the S&P 500 ”.

But some believe this year’s purchase – stocks more than quadrupled in 2020 – was in anticipation of Tesla’s addition to the index, meaning any rise in stocks could be short-lived.

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