Tesla shares up 12 percent as automaker zooms to join S&P 500

S&P 500 rallies into all-time high close

The decision to add the California-based automaker in the broad-based market index was announced on November 16, prompting another wave of affection for Tesla stock.

The value of Tesla's shares jumped more than 10% in the after-hours session on Monday in response to the news.

Many investors believe Tesla's stock is in a bubble.

The announcement marks Tesla's arrival as a consistently profitable company after building up losses in its first nine years as a public company.

Around 17pc of stocks in the S&P 500 index is owned by passive funds, according to Peter Sleep of investment manager 7IM, which means that at Tesla's current valuation they will have to buy around $66bn (£50bn) in Tesla shares. Tesla earned $331 million in the third quarter on revenue of $8.77 billion.

Tesla Inc's shares were up by more than 10% at the end of the trading day on Monday, after S&P Dow Jones Indices, the owner of the S&P 500 index, announced that the United States electric car-maker would join the index. Based on its market value Monday, Nov. 16, 2020, the electric vehicle maker would be one of the top 10 companies in the benchmark index upon entry. Its weighting will be so influential that the S&P DJI is mulling whether to add the stock at the full float-adjusted market capitalization weight all at once or in two tranches. Because of the potential for additions and deletions to the index to shake up the markets, the selection process is carefully guarded, which could help to explain the S&P committee's reluctance to include Tesla during its initial consideration of the company.

S&P 500 futures were choppy in the immediate aftermath of Moderna becoming the latest major United States pharmaceutical company to release positive results regarding the efficacy of its vaccine in preventing Covid-19 infection, just as they were following the Pfizer/BioNtech update last week.

Elon Musk's wealth leapt by $15 billion after Tesla nabbed a spot in the S&P 500 index on Monday.

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