The recent surge higher in Tesla (TSLA -2.71%) shares was attributed, in part, to anticipation that the electric-vehicle maker would soon be added to the S&P 500 Index. But the new list is out, and Tesla isn't on it. This caused Tesla shares to fall 7% in Friday's after-hours trading.
After markets closed on Friday, index manager S&P Dow Jones Indices announced Etsy (ETSY 2.44%), Teradyne (TER 0.49%), and Catalent (CTLT -0.54%) would be added, effective Sept. 21. Inclusion in the index is a mark of prestige and can lead to shares trading higher, as funds that track the S&P 500 are required to add the new stocks to their portfolios.
Image source: Tesla.
Tesla shares are up nearly 400% year to date, and some of the recent push higher can be explained by enthusiasm about its potential entry into the index. In July, the company announced its fourth-consecutive profitable quarter, fulfilling the final requirement for inclusion. This led widely followed analyst Dan Ives of Wedbush to declare that Tesla's addition to the index was "now likely a done deal."
In recent weeks, the company has made other moves that have been seen as making itself more desirable to the index, including its recently completed 5-for-1 stock split.
The snub tops off a disappointing week for Tesla and its shareholders. The automaker's shares fell sharply on Wednesday and were under further pressure on Thursday after Tesla announced plans to raise $5 billion in a secondary stock offering, which was coupled with news that investment management firm and large Tesla shareholder Baillie Gifford had reduced its stake in the company from 6.3% to 5%.
