Tesla gets green light to join S&P 500

The world's most valuable car company, Tesla, is set to join the S&P 500 in December.

It's a major win for Chief Executive Elon Musk following months of speculation.

Tesla's shares spiked 14% Monday (November 16) on the news.

With a stock market value over $400 billion, Tesla is larger than the vast majority of the companies already in the index.

Because of its size, the S&P Dow Jones Indices is considering whether to add Tesla in two stages.

Index funds would need to sell about $51 billion worth of shares in companies already in the index in order to make space for the electric car maker.

Speculation over whether the company would join the index has swirled since July after Tesla cleared a major hurdle: four consecutive quarters of profits.

Tesla's production is only a fraction of rivals such as Toyota, Volkswagen and General Motors.

But it has weathered the pandemic and economic crunch better than the auto industry as a whole, sending shares up about 450% in 2020.

Sceptics have warned against adding Tesla to the S&P 500.

Many investors believe Tesla's stock is in a bubble.

There is also looming competition from longer-established car companies and questions about corporate governance under Musk.

The chief executive agreed to pay out $20 million and step down as chairman in 2018 to settle fraud charges.

Tesla will join the S&P 500 prior to the opening of trading on December 21.