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Tesla (NASDAQ: TSLA) will be added to the S&P 500 index all at once at its full market capitalization before trade opens on December 21, S&P Dow Jones Indices said about the move that will see the most valuable company ever to join the index.
Shares of Tesla were up more than 5 percent in pre-market trade on Tuesday, following the announcement from the index provider, which has decided that Tesla would join the S&P 500 in a single tranche despite its massive market capitalization of US$538 billion before Tuesday's open.
Analysts expect high volatility of Tesla's stock in the coming weeks before the electric vehicle maker joins the index.
Last month, Tesla shares surged after S&P Dow Jones Indices announced that the EV manufacturer would be included in the S&P 500 index.
Back then, S&P Dow Jones Indices said that "Due to the large size of the addition, S&P Dow Jones Indices is seeking feedback through a 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."
On Monday, S&P Dow Jones Indices said that it had decided to add Tesla to the S&P 500 "at its full float-adjusted market capitalization weight effective prior to the open of trading on Monday, December 21, 2020."
"In its decision, S&P DJI considered the wide range of responses it received, as well as, among other factors, the expected liquidity of Tesla and the market's ability to accommodate significant trading volumes on this date," S&P Dow Jones Indices noted.
Tesla's addition to the S&P 500 will lead to massive trades by funds tracking the index because they would have to sell shares in other companies in the index and buy Tesla stock in order to accurately reflect the weighting in the index after December 21.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com