Three months ago, the electric car maker fulfilled the requirements to be added to the S&P 500 index. The stock price had run-up over the past few months in anticipation of the inclusion.
It however retreated when the S&P Dow Indices passed the company over during the quarterly rebalancing, due to concerns of the company’s heavy reliance on the sale of regulatory credits to achieve the inclusion requirement of four quarters of accumulated profit. The sale of regulatory credit is not Tesla’s core business, and the carmaker has said that profit from credits is expected to fall away in the future.
On Friday, the official close of Tesla was $408.09 per share. However, the stock rose as much as 13% after the trading hours.
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On Monday, however, Tesla was finally earmarked to be added to the benchmark in the quarterly rebalancing on December 21. This will cause a surge in demand for the stock as passive investors that track the index will need to buy the stock. It potentially creates an opportunity for early buyers, and as expected, the stock surged 13.9% after hours of trading in response to the news.
By:
Nnadi Victor
An Independent Economics Researcher
