Elon Musk’s Tesla on the verge of joining S&P 500 index


Tesla is on the verge of joining the prestigious S&P 500 stock market index following a year in which its shares have risen by more than 580%.

The electric car maker exceeded expectations for deliveries in the second quarter, according to an announcement last week, and analysts expect the company will announce a profit during its quarterly report on 22 July.

If they are right, then chief executive Elon Musk will have led Tesla to its first four-quarter profit – a key hurdle to being added to the S&P.

Tesla HQ
Tesla could join the S&P 500 index in the coming weeks

It follows a year of remarkable gains for Tesla, which rocketed up from around $233 (£184) per share last July to more than $1,365 (£1,079) per share today – an increase of roughly 585%.

The company currently has a market capitalisation – or the cumulative value of all of its shares in circulation – of about $250bn.

This would make it one of the most valuable companies ever added to the S&P 500, and larger than 95% of the companies already on the list.

If it is added to the index, then its shares could face even more demand.

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Howard Silverblatt, a senior analyst at S&P Dow Jones, told Reuters news agency that the most recent comparable situation he could recall was Yahoo in 1999.

Over the course of just five trading days, the company’s shares surged 64% from when the announcement was made it would be added to the index to when it was actually included.

A Tesla Model S electric vehicle
There is also a large short bet against Tesla at the moment

“The lesson learned from Yahoo was that when you have an up-and-coming issue that may possibly go into the index, you should already own a little of it,” said Mr Silverblatt.

“If you had to get into that stock, you were paying a heck of a premium compared to owning it a week earlier.”

However, some short sellers are betting $19bn that Tesla’s shares will fall.

Short sellers are people who borrow and then sell stock, anticipating a decline in price when they will then buy it back for less money – thus making a profit when the stock drops in value.

The bet against Tesla is the largest short level in dollars on record for an American company, according to S3 Partners.

The mood of short sellers has obviously irked Musk, who followed through on a joke to sell short shorts through Tesla’s online store last weekend.

The items are being sold in a limited-edition run, apparently only for the purpose of criticising Tesla’s short sellers, at a price which references a puerile internet meme about a sexual position and cannabis consumption.

Tesla is selling the 'S3XY' shorts on its website
Tesla was selling the ‘S3XY’ shorts on its website

The Tesla chief executive jibed that he would “send some to the Shortseller Enrichment Commission to comfort them through these difficult times” – and said they would cost $69.420.

The Securities and Exchange Commission is the US agency which regulates stock and options exchanges.

Musk has had numerous run-ins with the agency, including after tweeting that he was considering taking the company private at a price of $420 a share – again, the number being a popular reference to cannabis consumption.

Musk – who is also the majority owner and chief executive of SpaceXsettled this suit for a $20m fine and stepped down as the company’s chairman.

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