Tesla to Join the S&P 500: What It Means for Investors
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What is the main topic discussed in this episode?
Here's your Money Briefing for Friday, December 18th. I'm J.R. Whelan for The Wall Street Journal. When electric car maker Tesla joins the S&P 500 on Monday, it'll be the largest company by market value to ever join the index. It's a bit of a vindication for many small investors who've snapped up Tesla shares in recent years.
They really can be such a passionate bunch. And in my reporting in recent days, I've spoken to investors who have not only bought the stock, but also poured a lot of their money into the cars.
But how will Tesla's inclusion in the S&P 500 impact its shareholders, as well as the rest of Wall Street? Our markets reporter Gunjan Banerjee will be here with answers after the break.
Tesla is set to join the S&P 500 next week as one of the 10 biggest companies in the U.S.
How did Tesla become eligible to join the S&P 500?
stock market. But it's what is likely to happen before the start of trading on Monday that has many investors buzzing. For more, let's check in with markets reporter Gunjan Banerjee. Gunjan, thanks for being here.
Why is Tesla's S&P inclusion unusually significant given its market value?
Thank you for having me.
So just to take a step or two back, how did Tesla get here? It's the biggest company to ever join the S&P 500. Why is that?
Tesla's inclusion to the S&P 500, especially as such a large company, is pretty unusual. It's the biggest company ever to join the S&P 500. And the reason for that is that this year, Tesla, for the first time, delivered an annual profit. And that made it eligible for inclusion to the S&P 500.
What does joining the S&P 500 mean for Tesla as a company?
However, it's been a stock that individual and institutional investors have turned to for much of the past year. And they've sent its shares soaring and its market value soaring throughout the year, making it the biggest company to ever join the S&P 500 at this stage.
So at a basic level, what does it mean for a company when its stock enters the S&P? Does anything about the company change?
So this is a landmark moment for Tesla and any company that joins the index. You know, the S&P 500 is one of the, if not the most widely watched stock benchmark in the entire world. And it's supposed to kind of represent the U.S. economy. So it's an incredibly prestigious moment for any company. And especially for Tesla fans, you know, Tesla has such a diehard fan base. So many of them are kind of rejoicing right now. One, because their shares are up this insane amount this year. And two, Tesla has been such a popular bearish bet that many of them are almost feeling vindicated right now because, you know, Tesla short investors, those who have taken on bearish positions against the company. have been such a vocal bunch and have continuously pointed out kind of its flaws in recent years.
How have bullish and bearish investors reacted to Tesla's rise?
Yeah, let's talk about that bearish bet. How strong have those bears been that have been betting against Tesla?
This is one of the most fascinating things about Tesla, and that is how controversial of a stock it is. You know, it's the sixth biggest company in the U.S. stock market, but I would argue it's the most controversial name out there because it has this really passionate camp of bullish investors and bearish investors. And these bearish investors, they've critiqued Tesla for years, and they include prominent investors like Greenlight Capital, which is headed by David Einhorn. And these bearish investors, despite the stock's kind of run up this year, they remain pretty prominent. And Tesla remains the most shorted stock in the market.
Will index funds and 401(k) holders be affected by Tesla joining the S&P 500?
You know, Tesla has been a very popular stock among individual investors. What's the appeal?
It's so fascinating to talk to individual investors in Tesla because they really can be such a passionate bunch. And in my reporting in recent days, I've spoken to investors who have not only bought the stock, but also poured a lot of their money into the cars, buying one, two cars. I spoke to one investor who said, hey, if it wasn't for these crazy Tesla gains this year, I wouldn't have been able to even afford a car. And finally, I was able to buy a Tesla car. Some of them have been buying Tesla tequila, which was marketed on the carmaker's website for $250 a piece recently before it sold out.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:05–0:56
2
How did Tesla become eligible to join the S&P 500?
0:56–1:07
3
Why is Tesla's S&P inclusion unusually significant given its market value?
1:07–1:34
4
What does joining the S&P 500 mean for Tesla as a company?
1:34–2:47
5
How have bullish and bearish investors reacted to Tesla's rise?
2:47–3:30
6
Will index funds and 401(k) holders be affected by Tesla joining the S&P 500?
3:30–4:42
7
What market activity should investors expect when Tesla is added to the index?
4:42–6:03
Speakers
2 identifiedMore from WSJ Your Money Briefing
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