Teslas grand entrance into the SP 500 is expected to be preceded by a huge trade, with an unprecedented 80 billion of the electric car makers stock changing hands by the end of the session on Friday.
Elon Musks Tesla on Monday will become the most valuable company ever admitted to Wall Streets main benchmark, accounting for over 1 of the index. The electric car makers shares have surged about 60 since midNovember, when its debut in the SP 500 was announced.
Its addition to the SP 500 will force indextracking funds to buy over 80 billion worth of Tesla shares by the end of Fridays session so their portfolios correctly reflect the index, according to SP Dow Jones Indices. Those funds will simultaneously have to sell other SP 500 constituents shares worth the same amount.
Index managers will need to sell a large position across the other SP 500 constituents in order to fund the addition of TSLA, which could lead to substantial impact across the entire index, Virtu ITG Canadas head of index research, Ivan Cajic, wrote in a report this week.
Actively managed funds that benchmark their performance against the SP 500, many of which until now have avoided investing in one of Wall Streets most controversial stocks, will also be forced to decide whether to own Tesla.
While some investors view Musk as a visionary entrepreneur, others worry about missed production targets and corporate governance risk after Musk was forced to step down as chairman to settle fraud charges in…