Tesla’s next quarterly earnings could make it eligible to join the S&P 500
Share Now on:
Tesla reports its latest quarterly earnings on Wednesday. People will be paying extra close attention this time, because if the electric carmaker reports a profit for the second quarter, it could be eligible to join the S&P 500.
So, what does a company get out of joining this stock market index of 500 of the largest companies traded in the U.S.?
Really, it’s about investment. People have poured billions of dollars into funds that simply buy shares in whatever companies are in the S&P 500.
These are known as index funds and exchange-traded funds.
“So if Tesla’s added, they have to buy Tesla’s stock,” said Evan Rawley, a professor at the University of Minnesota.
That can boost stock prices, which makes the company’s shareholders happy. It also means that those funds would have to buy any new stock the company issues. That could help the company raise cash, said Anil Shivdasani at the University of North Carolina.
“This can be something that proves to be important for a company like Tesla, that, by its very nature, is a very capital intensive business,” Shivdasani said.
The big institutional investors behind those S&P 500 index funds would also own a bigger share of the company.
Shivdasani said that could give them more incentive to try and influence company policy.
“Institutional investors have been increasingly vocal, proactive,” he said, especially on environmental and social issues.
Marketplace is on a mission.
We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.
Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?