Tesla left off the S&P 500 sending it down as much as 20%
The electric-car makers' exclusion from the benchmark index was a surprise, as three considerably smaller companies made the cut
Bengaluru — Tesla tumbled as much as 20% on Tuesday after its surprise exclusion from the S&P 500 index added to the broader sell-off in tech stocks, which have dominated Wall Street’s recovery from the coronavirus-driven crash earlier this year.
Wall Street analysts and investors widely expected Tesla to join the S&P 500 after the company posted its fourth consecutive profitable quarter in July, clearing a major hurdle for its potential inclusion in the benchmark stock index.
In a surprise announcement, the S&P Dow Jones indices decided to add online craft seller Etsy, semiconductor equipment maker Teradyne, and pharmaceutical tech company Catalent to the S&P 500 instead.
S&P Dow Jones indices senior index analyst Howard Silverblatt declined to say why Tesla was not added to the S&P 500.
The three companies included by S&P are much smaller in size, but have a more consistent profitability track record.
Etsy, for instance, has posted 13 straight quarters of profits, compared with Tesla’s four.
“On one hand, the slide in the share price is due to its non-inclusion in the S&P 500, but on the other hand, the slide is also a normalisation of the company’s valuation,” Frank Schwope, an analyst at Norddeutsche Landesbank, said.
With a market capitalisation of about $390bn, Tesla is nearly 10 times larger than Etsy, Teradyne and Catalent’s combined stock market value of about $40bn.
Tesla’s recent stock rally has been driven by its blockbuster quarterly results, as well as on bets it would be added to the S&P 500, which would trigger huge demand for its shares from index funds that track the benchmark.
Fellow electric-car maker Nikola jumped 35% on Tuesday after General Motors said it was acquiring an 11% stake in the company.
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