Tesla poised to join S&P 500 after share price charges up

Electric car pioneer Tesla was today due to be added to the benchmark S&P 500 index.

Tesla is seen as a pioneer of electric vehicle development but is facing increasing competition from established mainstream rivals.
Tesla is seen as a pioneer of electric vehicle development but is facing increasing competition from established mainstream rivals.

Russ Mould, investment director at AJ Bell, said Tesla’s shares were up by more than 600 per cent this year and the stock would be going into the S&P 500 with a market cap that is big enough to make it the sixth biggest constituent, behind Apple, Microsoft, Amazon, Alphabet and Facebook.

He noted: “Tesla’s promotion, at the expense of Apartment Investment and Management (Aimco) should, in theory, trigger substantial buying of the shares by index-tracking funds, although they were given a month’s notice to snap up their required weighting of the stock.

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“There is also the possibility that active managers see this as a chance to unload shares onto passive funds at prices near an all-time high, at a time when Tesla has just tapped investors for $5 billion, its third such fund-raising after $2.3bn in March and $5bn in September.

“Tesla’s share price chart is certainly remarkable and will induce a bad case of vertigo in some.”

Mould added: “Detractors will mutter about governance and accounting. They will also flag how Tesla faces ever-greater competition in 2021 as it prepares to launch the Model S Plaid, Model X Plaid, Model Y and a roadster, since Citroen, Mercedes, Volvo, Audi, Mazda, Rivian (with its pick-up truck), BMW, Fiat, Ford, Hyundai, Porsche, Volkswagen, Nissan, Jaguar, Kia and Ssangyong all due to release new EV models of one kind or another in the coming 12 months.”

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