Tesla jumps 10% on news its stock to be added to S&P 500 index on December 21st

The index membership will propel further ownership of the electric car maker by index-oriented funds.

Shares of Tesla jumped in late trading as S&P Global, which manages the most prominent stock indices for U.S. issues, said after the closing bell on Monday that shares of the electric car maker will be added to the S&P 500, a broad measure of the most prominent stocks listed in the U.S.

The addition of Tesla will take place at the start of trading on Monday, December 21st, said S&P Global. It has not yet been announced which company Tesla will replace in the index; that disclosure will come closer to the effective, said S&P Global.

With a market cap of $390 billion, Tesla is a large company. And so, S&P Global said it is consulting with investors as to whether to add Tesla in two tranches, or all at once. 

Due to the large size of the addition, S&P Dow Jones Indices is seeking feedback through a consultation to the investment community to determine if Tesla should be added all at once on the rebalance effective date or in two separate tranches ending on the rebalance effective date.

Tesla shares are up 387% so far this year. Additions to the S&P 500 typically prompt fund managers of mutual funds who construct their investments to match the S&P to buy shares of the stock being added. Hence, addition to the index is a bullish development for Tesla.

Tesla stock rose 10% in late trading to $448