Tesla's stocks were down 7 percent during Friday's after-hours sessions after the electric car giant failed to be included in a group of firms being added to the S&P 500, a decision that proved very disappointing to Tesla stakeholders, who expected the company to make it to the stock index after an impressive July quarterly performance set the stage for its likely inclusion.
Many believed the Palo Alto, California-based company would be added to the index after it reached a milestone following its fourth quarter of consecutive profits, qualifying it to join the grouping of 500 of the biggest companies in the U.S.
After the benchmark index added Etsy Inc., whose market value is less than a 20th of Tesla's, the lack of the company's stock announcement sent its shares falling. Being qualified does not necessarily mean a firm will have automatic inclusion to the blue-chip index as a panel of experts are the one that decides which company it welcomes each month.
Semiconductor equipment maker Teradyne Inc. and medical technology group Catalent made it to the index. Shares of Etsy soared more than 5 percent in after-hours sessions, Teradyne climbed 2 percent, and Catalent was up 2 percent.
Tesla has rallied around 400 percent so far this year – doubling the advance of the best-performing stock on the S&P 500. The stocks settled almost 3 percent higher after they dropped 9 percent during Friday's regular trading session.
Tesla's shares were dragged down over the past week – falling from $502.16 on Tuesday to a nadir of $382.29 on Friday – on news that the group's second-biggest stakeholder had slashed its holdings, as well as the company's proposition to unload roughly $5 billion in shares.
In a research note, Wedbush Securities analyst Dan Ives said S&P 500's decision in not including the electric car maker – not for the moment, at least – may have hinged upon some concerns regarding the company's profitability barometer and cloudy full-year outlook. Ives gave the company's stock a "neutral" rating.
Howard Silverblatt, senior analyst at S&P Dow Jones Indices, did not say why Tesla was not included in the benchmark. The market, he said, is continuously evolving, and "we need to reflect that in our indices," Noel Randewich of Reuters quoted him as saying.
Being part of the S&P 500 gives a company the pride and bragging rights to boost its investor base as the benchmark monitors and controls over $11 trillion in assets. However, simply meeting some of the requirements for "membership" does not automatically mean being included to the prestigious benchmark.
