Tesla shares slump since it joins the S & P500 index

Shares of electric carmaker Tesla slumped in their debut on the S&P 500 on Monday, pulling back from record-high levels, as worries over a fast-spreading new coronavirus strain in Britain weighed on markets.

Tesla’s shares sank 5 per cent to $659.99 around 30 minutes in to the session. In its first day in the S&P 500, the stock was one of the primary drags on the benchmark index, that was down 1.2 %.

The business, headed by billionaire Elon Musk, becomes the most valuable ever admitted to Wall Street's main benchmark and accounted for a 1.69 % weight in the index before Monday's trading. The shares had surged some 70 % in value since mid-November, when Tesla's debut in the S&P 500 was announced.

The shares jumped 6 % on Friday per day of frantic trading ahead of their S&P 500 entry.

Tesla's addition to the S&P 500 led index-tracking funds to get $90.3 billion of shares by the finish of Friday's session to ensure that their portfolios reflected the index, according to S&P Dow Jones Indices' analyst Howard Silverblatt. The change works well ahead of the open of trading on Monday, S&P said earlier in December, and Tesla is replacing Apartment Investment and Management.

"All of the buying was done on Friday," said Keith Temperton, a sales trader at Forte Securities. "The news headlines is performed now ... the question now could be what next."

Mr Silverblatt said for each and every $11.11 Tesla moves, the S&P 500 changes 1 point, while the S&P's 2021 price/earnings ratio will rise to 22.6 from 22.3.

The dividend yield for the S&P after Tesla's inclusion would fall to 1 1.53 % from 1.56 %, he said.

California-based Tesla's stock surge has put its market value at about $630 billion, making it the sixth-most valuable publicly-listed US company, with many investors viewing it as wildly overvalued.

Tesla is the most traded stock by value on Wall Street, with $18bn worth of its shares exchanged typically in each session in the last 12 months, easily beating Apple in second place with average daily trades of $14bn, according to Refinitiv.

About a fifth of Tesla's shares are closely held by Musk, the chief executive, and other insiders.