Tesla to Be Added to S&P 500 in Single Tranche Dec. 21

Shares of Elon Musk electric vehicle maker surge in after-hours trading following announcement.
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S&P Dow Jones Indices said it will add Tesla  (TSLA) - Get Report to its benchmark S&P 500 index in a single tranche on Dec. 21, despite concerns over the potential for trading volatility as funds shuffle their holdings to add the stock to their portfolios.

S&P said Tesla will be added to the index on the date of the index's quarterly rebalancing.

Monday's decision followed consultations with the investment community.

Tesla “will be one of the largest weight additions to the S&P 500 in the last decade, and consequently will generate one of the largest funding trades in S&P 500 history,” S&P Dow Jones Indices said in a statement earlier this month announcing the addition.

Tesla joins the index as its seventh largest component, between Berkshire Hathaway.  (BRK.A) - Get Report  (BRK.B) - Get Report and Visa  (V) - Get Report.

To make room for Tesla, fund managers will likely have to sell shares of other companies, prompting volatile trading, Bloomberg reported. Trillions of dollars in investments are tied to the S&P 500 index of the largest U.S. companies.

Shares of the electric automaker founded by Elon Musk have soared in the two weeks since it was announced the company will be added to the index. Shares have risen about 40% since Nov. 16, pushing Musk past Bill Gates in total wealth.

Separately on Monday, Tesla won approval from authorities in China to begin sales of its Shanghai-manufactured Model Y SUV.  

Tesla shares fell 18.16, or 3.1%, to $567.60 in the regular session Monday. In after-hours action the stock rose $22.41, or 4%, to $590.01.