Goldman Sachs On Tesla’s S&P 500 Entry: “Could Spark $8 Billion Buying Spree”
The electric carmaker’s scheduled Dec. 21 inclusion in the S&P 500 Index could result in $8 billion of demand from active U.S. large-cap mutual funds, analysts at Goldman Sachs Group Inc. wrote in a note on Friday.
“Of the 189 large-cap core funds in our universe, 157 funds that manage around $500 billion in assets under management did not hold Tesla on Sept. 30,” the analysts wrote.
Assuming those funds chose to hold the carmaker at benchmark weight, they would need to buy $8 billion of the stock, or about 2% of Tesla’s market value, the analysts said.
The shares were 0.5% lower U.S. pre-market trading, but set for a 22% weekly gain after Thursday’s all-time high. Tesla is the best-performing large-cap stock in the U.S. this year, soaring about 500%, as investors show increasing confidence that electric cars, trucks and buses will dominate the future of the auto and transportation industries.
Tesla became eligible to join the index in July after reporting its fourth consecutive quarterly profit. The S&P 500 requires members be based in the US, trade on the New York Stock Exchange, Nasdaq, or Cboe, boast a market cap of at least $8.2 billion, and post four straight quarters of profitability on a GAAP basis.
If all criteria are met, a group called the Index Committee deliberates on whether the company should replace a current member of the index.
S&P Dow Jones Indices hasn’t yet revealed which member they’re removing to make room for Tesla.