Tesla debut takes bite out of S&P 500
Tesla Inc. was the biggest drag on the S&P 500 Index in its first day of trading on the benchmark.
The electric-vehicle maker, which now represents 1.6 per cent of the index and ended the day as its sixth heaviest-weighted stock, fell as much as seven per cent as it retraced gains from Friday when tens of millions of shares were purchased by index-fund managers.
Tesla budged the S&P 500 Index by about 4.1 points of its total 14.49-point drop, according to data compiled by Bloomberg.
“Hedge funds will treat this as a negative catalyst for Tesla given buying pressure eases off very quickly,” Roth Capital Partners analyst Craig Irwin said in an interview.
A Reuters report saying Apple Inc. is moving forward with self-driving technology and aims to produce a passenger vehicle by 2024 also weighed on Tesla shares late in the day, sending them to session lows.
Tesla closed down 6.5 per cent at US$649.86.
Institutional buying of Tesla surged late Friday as index-tracking managers rushed to add the shares to their funds ahead of its index inclusion.
Almost US$60 billion worth of stock changed hands at US$695 a share, most of it in one giant trade in the session's waning seconds, and more than US$150 billion worth of Tesla shares traded on Friday.
Other electric-vehicle companies, whose shares have gained significantly over the past month after Tesla's S&P 500 inclusion was announced, were also weak on Monday.
Some of the biggest declines came from Nikola Corp. and Workhorse Group Inc. Tesla soared 731 per cent this year through Friday in anticipation of the historic inclusion, making it the biggest company ever to be added to the benchmark.
The EV pioneer also joined the S&P 100, replacing oil and gas firm Occidental Petroleum Corp.
Tesla's addition to the S&P 500 led index-tracking funds to buy $90 billion of shares by the end of Friday so their portfolios reflected the index, according to S&P Dow Jones Indices' analyst Howard Silverblatt.
The change was effective prior to the open of trading on Monday, and Tesla is replacing Apartment Investment and Management Co.
California-based Tesla's rally has put its market value at about US$630 billion, making it the sixth-most valuable publicly listed U.S. company, though many investors view it as wildly overvalued. Some investors have speculated Tesla's stock might sell off as demand subsides following its addition to the S&P 500.
Tesla is by far the most traded stock by value on Wall Street, with US$18 billion worth of its shares exchanged on average in each session over the past 12 months. About a fifth of Tesla's shares are closely held by Elon Musk, the chief executive, and other insiders.