Tesla shares set to motor after S&P 500 promotion confirmed

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Tesla Inc (NASDAQ:TSLA) shares revved higher in aftermarket trading after it was confirmed that the electric car manufacturer will be included in the S&P 500 index.

In a major achievement for founder and chief executive Elon Musk, S&P Dow Jones Indices announced overnight that the California-based company will join the prestigious index prior to the opening of trading on December 21.

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With a market capitalisation of over US$380bn, making Tesla the largest company ever added to the S&P 500, the index administrator said the move may have to be made in two tranches so that index-tracking investment funds can cope.

As the S&P 500 tracking funds are forced to buy shares in the carmaker and sell other shares, this will trigger tens of billions of shares to be traded.

The S&P Dow Jones Indices committee is seeking feedback from the investors on whether to add it in two separate tranches.

The company that Tesla will replace has not yet been named.

Musk missed out on promotion to the index in October despite ticking all the necessary boxes for inclusion in the index, but has since turned a profit for the fifth quarter in succession.

Shares of Tesla surged 13% overnight to US$461.92, which compares to a price 12 months ago of US$70.

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