Wednesday, October 8, 2025

Latest

Tesla’s S&P Debut Could Trigger a Cascade of Selling in Other Index Components

As the anticipation of Tesla’s S&P 500 debut today continues to grow, the event may turn out to be not so great for various other companies already in the index.

Given Tesla’s astronomical valuation of $600 billion, the electric automaker will soon become the sixth biggest market cap in the S&P as well as the largest company to enter the index in history. With its entrance, Tesla will be replacing a significantly smaller company, but it’s the entire carmaker’s addition that could end up setting off a bomb of volatility that would ripple across the index’s other components.

As Bloomberg notes in a discussion with the head of portfolio trading at Citadel Securities Greg Sutton, there could be some serious implications following Tesla’s historic entry into the S&P. According to Sutton, “funds that mimic the benchmark are set to buy more than $70 billion of the carmaker’s shares and dump an equal amount of stock in existing members,” which in turn would create extensive selling pressure that could potentially lead to dislocations in the market.

Bloomberg refers to this troubling phenomenon as a “sudden deluge of supply,” and is the main reason why the S&P had previously considered adding Tesla in two tranches instead of all at once. Some of the companies that could be potentially impacted by this include Berkshire Hathaway, Procter & Gamble, and Johnson & Johnson.

According to Sutton, this is likely going to cause selling of other S&P components to increase, given that the sudden inclusion of Tesla will create even more stock that thus needs to be sold. This in turn will magnify the impact even more, especially across the less-liquid components of the S&P. Although the market will likely soak up the excess, but the potential for a liquidity impact still exists. On the other hand though, setting the sudden deluge of supply aside, Tesla’s debut into the S&P could also be the final needle that bursts the company’s colossal bubble.

Since the beginning of summer, Tesla’s stock had only risen when its implied volatility was high, given that the options deemed higher premiums. However, once Tesla joins the index, the historically high call option flows could very well come to an abrupt end, since implied volatility will not be able to rise. This will cause call options to lose their value, and with the call option hype becoming decimated, Tesla’s stock will no longer be able to achieve further returns. And thus, Tesla’s colossal bubble will finally fall victim to its own success.


Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Video Articles

Fortune Bay: The Potential Billion Dollar Project

Japan Gold Enters New Chapter as Barrick Alliance Concludes – John Proust

Barrick Mining’s “Company Defining [Gold] Discovery”

Recommended

Nord Precious Metals Produces High Grade Silver Concentrate From Tailings

ESGold Secures $9 Million In Non-Dilutive Funding From Ocean Partners

Related News

Tesla: FinTwits’ Analysis On The Q4 2023 Financials

Tesla (NASDAQ: TSLA) last night released its financial results for the fourth quarter of 2023,...

Thursday, January 25, 2024, 10:08:48 AM

Newly-Released Court Docs Show How Elon Musk’s 2018 Deal With Saudi Fund Fell Through

A transcript of Elon Musk’s exchange with Yassir Al-Rumayyan, the managing director of Saudi Arabia’s...

Tuesday, April 26, 2022, 04:28:00 PM

Tesla Q2 2025: Cash Flow Cratered 89%, Guidance “Difficult To Measure”

Tesla (NASDAQ: TSLA) reported Q2 2025 results, with total revenue falling 12% YoY to $22.50...

Thursday, July 24, 2025, 08:14:53 AM

Tesla Reveals Sourcing EV Battery Materials Directly From Mines

Tesla (NASDAQ: TSLA) recently revealed its unusual strategy of purchasing materials for electric vehicle battery...

Tuesday, July 11, 2023, 02:15:00 PM

Hertz Replaces CEO After Failed Tesla Bet

Hertz Global Holdings Inc. (Nasdaq: HTZ) is making a leadership change at the top after...

Monday, March 18, 2024, 07:50:51 AM