Tesla Inc suffered a loss of around $80 billion--an amount that overshadows the combined value of General Motors Co and Ford Motor Co--of its market value on Tuesday after its surprise exclusion from the S&P 500 index.?
It was the worst single-day percentage drop ever for the electric car company. It added to the broader sell-off technology stocks which have dominated Wall Street's recovery from the coronavirus-driven crash earlier this year.
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The stock closed 21.06% lower, while fellow electric automaker Nikola Corp jumped more than 40% after General Motors said it was acquiring an 11% stake in the company.?
Wall Street analysts and investors widely expected Tesla to join the S&P 500 after the company posted its fourth consecutive profitable quarter in July, clearing a major hurdle for its potential inclusion in the benchmark stock index.
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In a surprise announcement, the S&P Dow Jones Indices decided to add online craft seller Etsy Inc, semiconductor equipment maker Teradyne Inc and pharmaceutical technology company Catalent Inc to the S&P 500 instead.
"On the one hand, the slide in the share price is due to its non-inclusion in the S&P 500, but on the other hand the slide is also a normalization of the company's valuation," Frank Schwope, an analyst at NORD/LB, said.
Tesla's inclusion in the S&P 500 index would have required a lot of funds to buy its shares. Credit Suisse analyst Dan Levy said the exclusion likely reflects the challenges in adding a company of Tesla's size to the index.
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Bets against Tesla's stock have also increased slightly over the last month, according to financial analytics firm S3 Partners.
On Tuesday morning, short interest in Tesla was $25.03 billion, with about 8.10% of its outstanding shares shorted.
Tesla's recent stock rally has been driven by its blockbuster quarterly results and on bets it would be added to the S&P 500, which would trigger massive demand for its shares from index funds that track the benchmark.