Electric car maker Tesla is to join the S&P 500 next month, triggering a multi-billion mega-trade as index funds are forced to buy the Elon Musk-founded company’s shares.

Tesla stock rallied more than 12% in after-hours trading on Nasdaq this week after S&P Dow Jones Indices announced that the company would join the S&P 500 index ready for trading on 21 December.

Barron’s estimates nearly $10 billion worth of Tesla stock will need to be purchased by index funds.

At $459.90, the company’s shares are less than 8% below their $498.32 all-time high, struck on the final day of August this year.

Tesla will be ‘one of the largest weight additions to the S&P 500 in the last decade, and consequently will generate one of the largest funding trades in S&P 500 history’, S&P Dow Jones Indices said, sparking rumours that the stock may be added in more than one tranche to help the market absorb the company in an orderly manner.

With a market capitalisation of more than $435 billion, Tesla will become one of the most valuable companies on Wall Street and the eighth largest S&P 500 stock, ahead of Wal-Mart, the world’s largest retailer at approximately $432 billion.

The S&P 500 is one of the most closely watched barometers of the mood of investors across the pond, and its performance impacts stock markets globally.

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