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The Tesla factory in Shanghai. It is the most valuable car manufacturer in the world by a wide margin.
Hector Retamal / AFP via Getty Images
Tesla
stocks increase before a very large day for stocks. Tesla will join the
S&P 500
Monday and its share price at the end of trading on Friday will determine the weighting Tesla will have on the index.
The S&P 500 is weighted by market capitalization, adjusted for the number of shares available for trading, which for Tesla (ticker: TSLA) is approximately 80%. The rest is owned by informants, including CEO Elon Musk.
Tesla’s current market value is approximately $ 610 billion. Approximately $ 490 billion is available for trade. And the total market value of the S&P 500 is about $ 32 trillion.
All these figures come to have an approximate weight of 1.5% for Tesla in the index. Tesla is already the most valuable company ever added. With a weighting of 1.5%, it could also become the largest weighting ever added. This title has it
Berkshire Hathaway
(BRK.B). Its original weighting on the S&P 500 was approximately 1.4%. Berkshire was added in 2010.
Adding large companies is tricky. The S&P really considered adding Tesla in two shares, with a smaller weighting and then a full weighting, to help smooth the impact. But after asking for answers from fund managers, it was decided against.
The commercial impact has been significant. Shares have risen about 58% since Nov. 16, when the S&P index committee made the decision to include Tesla. The S&P i
Dow Jones Industrial Average,
by comparison, they have increased by only 3% and 1%, respectively, since then.
De Barron suggested that a 60% gain was too great when they initially speculated about the inclusion of the Tesla S&P 500, after the company reported a second-quarter profit. We were wrong. Shares have skyrocketed more than many experts expected.
One of the reasons for our skepticism was Tesla’s meteoric rise this year. Shares have risen 673% to date, making it the world’s most valuable automaker by a wide margin.
Toyota engine
(TM) is the second with a market capitalization of approximately $ 250 billion.
Between $ 5 trillion and $ 6 trillion are invested in funds indexed to the S&P 500. Those funds begin buying shares of Telsa on Monday and have about 120 million shares to buy. Tesla has traded an average of about 45 million shares daily over the past few days.
There is a potential for a fall in the purchase after the index. How important could it be, like the pre-index increase?
Shares of Tesla rose 4.1% to $ 648 a share on Thursday afternoon. Indexing is probably the dominant factor, but Barclays analyst Brian Johnson raised his price target by 84% to $ 230, from $ 125. This is a big increase, but still a long way from $ 648. Johnson, however, values the sell-off shares.
Corrections and amplifications: The market capitalization of the S&P 500 is approximately $ 32 trillion. An earlier version incorrectly said $ 3.2 trillion.
Write to Al Root at [email protected]