Tesla overlooked for S&P 500, stock tumbles

S&P Dow Jones Indices, the owner of the S&P 500 index, wiped $80 billion off the market value of electric car-maker Tesla Inc on Tuesday, when it excluded the company from the stock market index of US's 500 largest companies.

Tesla's shares closed the day 21.06% lower, its worst loss since it began trading a decade ago. The company was expected to join the index after posting four consecutive quarters of profit — the requirement for inclusion in the market which for years had eluded the investment-heavy carmaker with low sales and production volumes.

However, the sudden slide in Tesla's prices could also be seen as readjustment after a meteoric few months during the economic upheaval caused by the coronavirus. Tesla's shares had risen in value more than five-fold between mid-March and the end of August during an extremely volatile period for the US economy and its markets.

Tesla's slide also coincided with a sentiment in tech stocks in general taking a hit. Apple closed 6.7% lower on Tuesday, while Microsoft was down by 5.4%.

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Tesla falls as Nikola rises

Meanwhile, another US electric car-maker named after the Serbian-American scientist behind alternating current, Nikola Corp, reported a 40% jump in its shares on Tuesday, on the back of a $2 billion manufacturing deal with General Motors (GM). GM also announced the purchase of an 11% stake in Tesla's competitor as part of the deal. Nikola is one of comparatively few companies seeking to manufacture larger electric trucks, also using hydrogen fuel cell technologies.

Surprise S&P inclusions 

Etsy Inc, an online retailer, Teradyne Inc, which specializes in automatic test equipment mainly for electronics, and Catalent Inc, a pharmaceutical technology company, were the surprise choices over Tesla for inclusion in the S&P 500. 

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Dan Levy, an analyst with Credit Suisse, told Reuters that the company, founded by billionaire Elon Musk, may have been excluded as there were challenges in adding a company of Tesla's size to the index.

Tesla's market capitalization stands at $390 billion, almost 10 times more than the market capitalization of Etsy, Teradyne and Catalent combined.

am/msh (Reuters, AP, dpa)