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Bloomberg
Tesla Inc, Elon Musk’s 17-year-old upstart carmaker, took a giant step towards blue-chip respectability, getting named to one of the world’s most famous stock indexes in an action that will greatly broaden its investor base.
The announcement that Tesla will enter the S&P 500 on December 21 follows months of speculation, and one temporary setback, after the stock failed to make the cut during the index’s quarterly rebalancing in early September. The anticipation has helped drive a nearly fivefold rally in the stock this year to almost $390 billion, making the electric vehicle pioneer the biggest company ever to be added to the gauge. It will also be one of the index’s most influential constituents with a weighting that falls around those of Berkshire Hathaway, Johnson & Johnson and Procter & Gamble Co.
It’s so big that S&P Dow Jones Indices said it is seeking feedback from the investment community to determine if Tesla should be added all at once or in two separate pieces. The company that Tesla is to replace in the index will be named later, the index provider said.
The news of S&P 500 inclusion “will of course likely drive a rally in the stock today,†JMP Securities analyst Joseph Osha wrote in a note to clients. “We think there is still upside,†he said, adding that Tesla should be valued like other “category killer†companies such as Apple Inc., instead of compared with other car companies.