Adding Elon Musk's Tesla to Wall Street's most followed benchmark will force index funds to buy about $73 billion worth of its shares, S&P Dow Jones Indices said.
The electric car maker's stock has surged over 40% since Nov. 16, when it was announced Tesla would join the index.
At that time, S&P Dow Jones Indices said it would consult investors about whether to potentially add Tesla in two tranches a week apart to make the addition easier to handle for index funds.
"In its decision, S&P DJI considered the wide range of responses it received, as well as, among other factors, the expected liquidity of Tesla and the market's ability to accommodate significant trading volumes on this date," S&P Dow Jones Indices said in a media statement.
With a stock market value around $550 billion, Tesla will be among the most valuable companies ever added to the index. Tesla will account for just over 1% of the S&P 500.
Up about 600% in 2020, the California-based car maker has become the most valuable auto company in the world, by far, despite production that is a fraction of rivals such as Toyota Motor, Volkswagen and General Motors.
A blockbuster quarterly report in July cleared a major hurdle related to profitability that had prevented Tesla's inclusion in the S&P 500.
About a fifth of Tesla's shares are closely held by Musk, the chief executive, and other insiders. Since the S&P 500 is weighted by the amount of companies' shares actually available on the stock market, Tesla's influence within the benchmark will be slightly diminished, putting it at around seventh place, currently held by Johnson & Johnson.
S&P Dow Jones said it would announce on Dec. 11 which company Tesla would replace in the S&P 500.
(Reporting by Arunima Kumar in Bengaluru and Noel Randewich in San Francisco; Editing by Sriraj Kalluvila and Lincoln Feast.)
By Arunima Kumar and Noel Randewich