Tesla has met the criteria to enter the S&P 500, but the electric automaker was snubbed today, instead the index’s committee decided to add Etsy, Teradyne and Catalent instead.
Criteria to be considered in the S&P 500 include being based in the U.S., plus either listed on the NYSE, Nasdaq or Cboe, to go with a market cap of over $8.2 billion. Companies must also report four straight quarters of profit, as defined by U.S. generally accepted accounting principles (GAAP).
But that’s not all that is required to make the S&P 500. The so-called “Index Committee” from the S&P Dow Jones Indices decides whether a company is eligible to be included or not, based on a variety of factors.
Wedbush analyst Dan Ives said in a note to investors, “It was viewed as almost a consensus move based on all the metrics that Tesla was likely to get into the S&P 500 club this time around and thus will have a negative knee jerk investor reaction accordingly in an already white knuckle tape.”
“The profitability metrics and forecast likely was the swaying factor that might have excluded Tesla this time around. In a nutshell Tesla not getting into the S&P 500 will be a head scratcher to the bulls that viewed this as virtually a lock given all the parameters met,” added Ives.
News of the S&P 500 snub has resulted in shares of Tesla falling in after hours trading, currently down over 6% on Friday evening, as many investors expected Tesla to join the index.
