Tesla shares slump in S&P 500 debut, pulling back from record levels

REUTERS: Shares of electric carmaker Tesla slumped in their debut on the S&P 500 on Monday, pulling back from record-high levels, as worries over a fast-spreading new coronavirus strain in Britain weighed on markets.

Tesla’s shares sank 5per cent to US$659.99 a half hour into the session. In its first day in the S&P 500, the stock was one of the biggest drags on the benchmark index, which was down 1.2per cent.

The company, headed by billionaire Elon Musk, becomes the most valuable ever admitted to Wall Street's main benchmark and accounted for a 1.69per cent weight in the index ahead of Monday's trading. The shares had surged some 70per cent since mid-November, when Tesla's debut in the S&P 500 was announced https://www.spglobal.com/spdji/en/media-center/news-announcements/#indexNews, and have soared about 700per cent so far in 2020.

The shares jumped 6per cent on Friday in a day of frantic trading ahead of their S&P 500 entry.

Tesla's addition to the S&P 500 led index-tracking funds to buy US$90.3 billion of shares by the end of Friday's session so that their portfolios reflected the index, according to S&P Dow Jones Indices' analyst Howard Silverblatt. The change is effective prior to the open of trading on Monday, S&P said earlier in December, and Tesla is replacing Apartment Investment and Management Co.

"All the buying was done on Friday," said Keith Temperton, a sales trader at Forte Securities. "The news is done now ... the question now is what next."

Silverblatt said for every US$11.11 Tesla moves, the S&P 500 changes 1 point, while the S&P's 2021 price/earnings ratio will rise to 22.6 from 22.3.

The dividend yield for the S&P after Tesla's inclusion would fall to 1.53per cent from 1.56per cent, he said.

California-based Tesla's stock surge has put its market value at about US$630 billion, making it the sixth most valuable publicly listed U.S. company with many investors viewing it as wildly overvalued.

Tesla is by far the most traded stock by value on Wall Street, with US$18 billion worth of its shares exchanged on average in each session over the past 12 months, easily beating Apple, in second place with average daily trades of US$14 billion, according to Refinitiv.

About a fifth of Tesla's shares are closely held by Musk, the chief executive, and other insiders.

(Reporting by Megan Davies; Additional reporting by Sruthi Shankar, Noel Randewich, Lewis Krauskopf and Ira Iosebashvili; Editing by Daniel Wallis and Steve Orlofsky)