Tesla Inc tumbled 15% early on Tuesday after its surprise exclusion from the S&P 500 index added to the broader sell-off in technology stocks which have dominated Wall Street’s recovery from the coronavirus-driven crash earlier this year.
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.
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.
S&P Dow Jones Indices senior index analyst Howard Silverblatt declined to say why Tesla was not added to the S&P 500.
The three companies included by S&P are much smaller in size, but have a more consistent profitability track record.
However, with a market capitalization of about $390 billion, Tesla is nearly 10 times larger than Etsy, Teradyne and Catalent’s combined stock market value of about $40 billion.
Tesla’s recent stock rally has been driven by its blockbuster quarterly results, as well as 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.
Shares of Etsy, which have more than doubled this year, were up about 1% in premarket trading, while Teradyne and Catalent were lower.
They are set to replace H&R Block Inc, Coty Inc and Kohl’s Corp in the index on Sept. 21.