S&P Dow Jones Indices confirmed after markets closed on Monday that they would add the company to Wall Street’s main index from Dec 21, firing the starting gun on a major reorganisation of investment funds that track the basket of stocks.

At US$400 billion, Tesla’s market capitalisation is a hundred times that of the S&P’s smaller companies, according to Refinitiv data, and potentially making it the biggest ever addition to the index.

S&P DJI said the addition of the car company would require investment funds indexed to the S&P 500 to sell about US$51 billion worth of shares of current member companies so that their portfolios correctly reflect the index.

“Potentially one of the pushbacks on adding Tesla to the S&P was the elevated stock price,” Credit Suisse analyst Dan Levy wrote in a note.

“The stock’s recent pullback provides better opportunity for index trackers to build positions.”

Bolstered by a decade of stock market gains, the combined market capitalisation of the S&P 500 now totals close to US$32 trillion, and S&P DJI data at the start of this year showed investments indexed to it reached US$4.6 trillion.

If the pre-market gains hold, Tesla’s own value will top US$440 billion, more than the S&P gained on Monday after news emerged of successful Covid-19 vaccine trial data from Moderna Inc.

The run in to Tesla’s addition next month may see more speculative buying.

In 1999, Yahoo surged 64% in five trading days between the announcement that it would be added to the index and its inclusion.

Yahoo’s market capitalisation at the time was only US$56 billion.

“The 12% move is probably a short squeeze more than anything else,” said Mark Taylor, sales trader at Mirabaud Securities, London.

“I believe in letting the dust settle for a few days and see how things pan out in terms of how much tracker money has gone behind this.”