Tesla tumbles 6.5% from record high in S&P 500 debut

Shares of Tesla ended sharply lower on their S&P 500 debut on Monday, with losses accelerating on news of potential future competition from Apple.

Tesla ended down 6.5 percent from a record high in the previous session, its steepest one-day drop in over a week. Losses steepened towards the end of the session after reports that Apple is targeting 2024 to make a passenger vehicle that could include its own breakthrough battery technology.

The firm’s shares had opened down nearly 5 percent.

The decline in Tesla’s shares accounted for about 0.1 percentage points of the S&P 500’s 0.4 percent decline for the day, according to Refinitiv data.

The electric carmaker, headed by billionaire Elon Musk, is the most valuable company ever admitted to Wall Street’s main benchmark and accounted for a 1.69 percent weight in the index ahead of Monday’s trading. The shares had surged almost 60 percent since mid-November, when Tesla’s debut in the S&P 500 was announced and have soared almost 700 percent so far in 2020.

Tesla jumped 6 percent on Friday in frantic trading ahead of its S&P 500 entry.

Tesla’s addition to the S&P 500 led index-tracking funds to buy US$90 billion of shares by the end of Friday so their portfolios reflected the index, according to S&P Dow Jones Indices’ analyst Howard Silverblatt. The change was effective prior to the open of trading on Monday, and Tesla is replacing Apartment Investment and Management Co.

Actively managed funds that benchmark their performance to the S&P 500 must now decide whether to buy shares of Tesla, and risk underperforming if Tesla’s recent rally continues and they don’t own the shares.

California-based Tesla’s rally has put its market value at about US$616 billion, making it the sixth most valuable publicly listed US company, although many investors view it as wildly overvalued.

About a fifth of Tesla’s shares are closely held by Chief Executive Musk and other insiders.