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Tesla Fails To Become Part of S&P 500 Index

The company had been widely expected to join the benchmark index, but S&P Dow Jones Indices went with Etsy, Teradyne and Catalent instead.

Image source: Tesla

(Reuters) – Tesla Inc shares are down over 17% at 10:05am ET Tuesday after its surprise exclusion from the S&P 500 index added to the broader sell-off in technology 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 Inc, semiconductor equipment maker Teradyne Inc and pharmaceutical technology company Catalent Inc 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.

However, with a market capitalization of about $390 billion, Tesla is nearly 10 times larger than Etsy, Teradyne and Catalent’s combined stock market value of about $40 billion.

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 massive demand for its shares from index funds that track the benchmark.

Shares of Etsy, which have more than doubled this year, were up about 1.5%, with Catalent up 1.1% and Teradyne down 2.5%.

They are set to replace H&R Block Inc, Coty Inc and Kohl’s Corp in the index on Sept. 21.

Reporting by Subrat Patnaik in Bengaluru; Editing by Shounak Dasgupta

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