Tesla’s addition to the S&P 500 on December 21st is expected to present a challenge because of its size—it will be the largest company ever to join the index ($555 billion), according to a recent article in The Wall Street Journal.
“Asset managers and trading desks across Wall Street have held virtual summits to debate the matter,” the article said, noting that some are voting to divide the addition over a two-day period to avoid the potential for a surge in market volatility. Give its size, Tesla is expected to represent at least 1% of the entire index and would be the sixth-largest company in the S&P (between Berkshire Hathaway and Facebook).
Regardless of the logistics, the article reports that investors and traders expect “the market for Tesla shares to heat up even further ahead of the inclusion”—shares have risen more than 40% to $585.76 in the last half of November alone. According to the article, Tesla’s inclusion in the S&P 500 is expected to “put more than $100 billion into motion.” The trade date for the stock (December 18th) also coincides with the quarterly event called quadrupole witching, the Friday when options and futures on both indexes and stocks expire simultaneously. The article notes, “volume is usually heavy on those days and would help boost liquidity on the day of Tesla’s inclusion.”