Tesla, profitable at last, bulls its way into the S&P 500

The stock market has never seen anything quite like Tesla.

Led by the mercurial billionaire Elon Musk, the electric- car maker’s shares have soared roughly 14,000% since it went public a decade ago. Even amid an economy-roiling pandemic it’s up roughly 700% this year.

And now, a company that has provoked years of equally intense fandom and criticism among money managers and tech bros the world over is being added to the S&P 500 traditionally a marker of corporate maturity.

In this, too, the stock market has never seen anything like Tesla: On Monday, the company will be the largest ever added to the index, and, with a market capitalization of $650 billion, the sudden weight it will throw into the market could have strange consequences.

“This is by far the biggest index inclusion that they’ve ever attempted,” said Steve Sosnick, chief strategist at Interactive Brokers in Greenwich, Connecticut. “The stock will immediately be a top 10 name in the S&P, which is nuts.”

Companies worth a fraction of Tesla would have been included in the index long ago, but the approach that has made it such a valuable company has brought challenges. Despite all its technological innovations, Musk’s celebrity aura and a highrisk, high- reward approach to business, Tesla for the longest time was unable to meet the most humdrum requirement of corporate America: turning a profit. Criteria for inclusion require the sum of the company’s fully audited profits in the four most recent quarters to be positive. Tesla hit that mark only this year.

Tesla was never short on ambition, though. From the beginning, it proposed to compete directly with the world’s biggest automakers by slowly rolling out a lineup of all- electric vehicles at a time the technology seemed impractical. General Motors’ electric EV1 had gone the way of the dinosaur a decade earlier, and Tesla’s plan seemed wildly unrealistic for a startup that wanted to compete with Detroit.

But the messianic mystique of Musk, a chief executive/hype man in the vein of Apple’s Steve Jobs, was alluring. He sold a vision that gave Tesla an endless appetite for investor cash, and pockets both deep and shallow bought it: Over the years, the company pulled in capital from venture

capitalists, bond markets and stock investors, and inspired a wave of casual investors once it went public.

But many investors won’t actually have a choice about buying Tesla’s shares.

The S&P 500 is one of the most widely followed barometers of the American stock market, serving as the bench mark against which investors measure more than $11 trillion worth of investments. More than $4.5 trillion of those investments are in index funds designed to mirror the stocks in the S&P.

Those funds have been buying up shares of Tesla since mid- November in preparation for Tesla’s admission to the S& P 500, which has sent its shares up over 60% since the announcement that the company would be included.