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The announcement of Tesla’s inclusion in the S&P 500 boosted the stock of electric vehicles on Monday night and Tuesday. The move helps boost the considerable wealth of Tesla CEO Elon Musk.
What happened: The S&P 500 announced that Tesla Inc. (NASDAQ: TSLA) will be included in the S&P 500 Index for the first time.
The move sent Tesla shares up 14% on Monday after hours.
The designation increases Musk’s wealth by $ 15 billion, according to Business Insider. This jump would put Musk in front Facebook Inc (NASDAQ: FB) CEO Mark Zuckerberg for the title of world’s richest third person.
Bloomberg reported Musk’s wealth at $ 117 billion. Musk ranks first among the 500 billionaires on the Bloomberg Billionaires Index, with a wealth gain of $ 90 billion this year.
Musk owns 21% of Tesla’s shares and has the option of owning more through a 2018 compensation plan tied to stock performance and financials.
Related Link: 3 ETFs for the Addition of Tesla’s S&P 500
Why this is important: Inclusion in the S&P 500 is important for Tesla as it will force index-linked funds and ETFs to accumulate shares of the electric vehicle company.
The large amount of shares needed to complete this trade could cause Tesla shares to trade much higher in the coming months.
An increase in Tesla shares could also help Musk earn more, as it increases the automaker’s market cap.
Musk’s 2018 compensation plan is linked to Tesla’s market capitalization, annualized EBITDA, and annual revenue.
Musk hit a potential payout of $ 3 billion by hitting the six-month market cap of $ 250 billion.
Tesla’s share price hike put the market cap above $ 350 billion, giving Musk a better opportunity to hit the next two installments of his compensation plan.
Each tranche releases 8.44 million Tesla stock options at $ 70.
TSLA Price Action: Tesla shares were trading up 8.39% at $ 478.68 in the last check on Wednesday.
© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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