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S&P 500 Welcomes Three New Companies to Its Index—Tesla, Inc. Not Included

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Key Points

  • S&P Dow Jones Indices reported on Friday afternoon that it will add three companies to S&P 500—Catalent Inc., Etsy Inc., and Teradyne Inc.
  • Tesla Inc. was thought to be in line with the addition after reporting a fourth consecutive quarter of profitability, an index criterion that has been cited by many analysts as a justification for a gigantic rise in the stock of the electric car maker in recent weeks.
  • Following the news, Tesla shares dropped more than 6 percent in after-hours trading. Catalent shares increased by almost 3%, Etsy shares increased by more than 5%, and Teradyne shares increased by more than 2%.
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On Friday afternoon, S&P Dow Jones Indices revealed it would add three companies to S&P 500 US: SPX—Catalent Inc., Etsy Inc., and Teradyne Inc. Tesla Inc. was thought to be in line with the addition after reporting a fourth consecutive quarter of profitability, an index criterion that has been cited by many analysts as a justification for a gigantic rise in the stock of the electric car maker in recent weeks.

“S&P 500 inclusion now likely a done deal,” Wedbush analyst Dan Ives said after Tesla reported a profitable quarter in July.

When reached Friday, Ives said, “The Champagne was on ice to get into the S&P 500, [it] was baked into shares.”

“This was a bit of a shocker and the Street assumed this was a foregone conclusion,” Ives said in an email to MarketWatch. “Tesla not getting into the S&P 500 club is a head-scratcher and the stock will likely be down for the indexing implications.”

In a note later, Friday Ives reiterated his neutral rating on Tesla’s stock. Just 22 percent of FactSet-tracked sell-side analysts rate Tesla a “buy” as of Friday afternoon, which was in fact an increase from earlier in the week but still well below other stocks in the S&P 500 index.

Since reporting second-quarter results on the afternoon of July 22, Tesla stock has added more than 31 percent, although that performance has decreased this week — at the end of Monday’s trading session, the stock has risen 56 percent since earnings.

Shares have suffered in the aftermath of a stock split this week, unveiling a decision to sell up to $ 5 billion in fresh shares and insider selling shares. Overall, the shares of the electric-car maker have quintupled this year, bringing its market capitalization to $380 billion as of the closing bell on Friday.

Three previous members of the S&P Midcap 400 will move up to the larger index instead, replacing three other companies that moved down to the midcap index, H&R Block Inc., Coty Inc., and Kohl’s Corp. The changes will take effect before the open of trading on September 21.

Following the news, Tesla shares dropped more than 6 percent in after-hours trading. Catalent shares increased by almost 3%, Etsy shares increased by more than 5%, and Teradyne shares increased by more than 2%.

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