Reports said that millions of more investors would acquire an interest in Tesla (TSLA) on Monday when the electric carmaker joins the prestigious S&P 500 index.
Several analysts believe the milestone is to validate Elon Musk’s firm’s string of good news this year.
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The Coronavirus pandemic did not deter the demand for the company’s vehicles this year.
However, if Tesla makes its way into the Standard & Poor’s 500 indexes, investors can expect an increasingly difficult ride through the markets.
Tesla has hit its fair share of bumps since its founding in California in 2003.
Elon Musk, CEO of Tesla, has clashed with authorities over everything from self-driving cars to virus shutdowns, even leaving the company on the verge of bankruptcy.
Tesla electric vehicle maker Elon Musk has courted controversy through his defamation suits, drug use on live webcasts, and the contemplation of taking the electric car maker private over Twitter.
This year, it has mostly experienced positive performance on its shares, rising over 700%, as the firm seemed to have put its manufacturing and financial challenges behind it.
Its price rose by almost 6% on Friday night, as analysts tracked by S&P bought up more than $80 billion in stock ahead of S&P’s inclusion.
The value of Tesla’s stock market capitalization exceeds $600 billion, making it one of the world’s most valuable car makers, behind tech giants like Apple and Amazon.
The company claims that distinction despite selling a fraction of rivals such as Toyota, GM, and Volkswagen.
According to Forbes’ real-time ranking of billionaires, Tesla’s skyrocketed share price has made Mr. Musk one of the world’s wealthiest individuals with a fortune of nearly $150bn, behind only Jeff Bezos of Amazon.
However, the rise is not entirely due to Tesla’s prospects for sales, but rather to expectations that it will join the S&P, causing funds that follow the index to buy shares.
Tesla sets out to defy critics by joining a key stock index.
The index manager S&P Dow Jones Indices announced the decision last month, following five consecutive quarters of Tesla’s profitability.
The share price of Tesla has increased by around 60% since then.
A further swing is expected on Friday, as index funds purchase Tesla and sell other holdings in a bid to balance their portfolios ahead of its inclusion on Monday.