Tesla drags down S&P 500 after its debut

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 percent of the index and ended the day as its sixth heaviest-weighted stock, fell asmuch as 7 percent 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 selfdriving technology and aims 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 percent.

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 $60 billion worth of stock changed hands at $695 a share, most of it in one giant trade in the session’s waning seconds, and more than $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 percent 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&P100, replacing oil and gas firm Occidental Petroleum Corp.

“There is strong precedence for positive returns for stocks prior to S&P 500 inclusion and post announcement, but very limited precedent for near term outperformance post inclusion,” Sanford C. Bernstein analyst Toni Sacconaghi wrote in a note earlier this month.

Many investorswho drove Tesla’s value higher are individuals who bought the stock after a fivefor- one split reduced the price of a single share last summer. The bulls are largely betting on the company’s future and point to five straight profitable quarters, rising sales, and world-leading battery and software technology to justify their bets.

Bears, including short sellers who have lost millions betting against the stock, still predict a collapse. They cite limited markets for high-priced Tesla vehicles, repeated quality problems, huge capital costs for factories, and growing competition from conventional automakers.

Bullish analysts are expecting the rally to resume soon, although possibly at a slower pace.