Tesla Inc. will join major U.S. equity leagues on Monday, a relatively routine action unprecedented by the large size of the Silicon Valley electric vehicle manufacturer’s market valuation.
Tesla TSLA,
is by far the largest company to be added to the S&P 500 SPX Index,
Come Monday, when it starts trading at the benchmark, it will likely be the sixth company in the market value index, currently well above $ 600 billion.
There is a “strong precedent” for stock gains before their inclusion in the S&P and after the announcement, but a very limited precedent for short-term gains after the inclusion, said analyst Toni Bernstein’s Sacconaghi on a recent note.
And, as Tesla’s fourth-quarter sales report in early January is not expected to “be a blast, we would recommend investors make short-term profits by Dec. 21,” he said.
The 50 largest additions to the S & P500 index since 2010 have exceeded on average “strongly” before their inclusion announced in S&P, have exceeded an additional 3% between the announcement and inclusion and “have fallen modestly the days and months after inclusion, Sacconaghi said. .
On average, new participants fell 1.7% in the six months following inclusion, he said.
So far, Tesla’s appreciation has been more spectacular, including more than 230% in the last six months, when expectations were high, the company would join the index after meeting criteria that included long-term profitability .
So far this year, Tesla shares have gained around 700%, which compares to gains of around 14% for S&P.
S&P Dow Jones Indices announced the inclusion of Tesla on November 16, after disrupting the company in a previous rebalancing. Stressing the complexity of adding the company, he consulted investors on how to do so, ultimately deciding to add Tesla at the same time.
Since then, Tesla has seen its shares increase by more than 60% and add nearly $ 200 billion in market capitalization to 625 billion today, about 10 times the GM of General Motors Co.
and 18 times Ford Motor Co. F,
See also: Tesla’s debt is approaching S&P’s investment rating
Joining S&P puts Tesla in countless index monitoring funds, which add up to the many managed funds that Tesla has had to add to its holdings to balance them.
Most of the repositioning is likely to occur after Monday, Sacconaghi said.
In addition to the imminent incorporation into the S&P 500 index, Tesla received good news about its corporate debt on Thursday at the end.
S&P Global Ratings upgraded Tesla bonds to BB, leaving the company’s solvency measure just two steps away from the coveted investment grade rating.