Unclear, but over the past 3 yrs
@mongo and I have discussed the following theory. For this S&P 500 rebalancing event, the following is at play:
- the S&P 500 index reference date for the Q4 rebalancing was the 3rd Fri of Nov,
- at that time (Nov 18, 2022), TSLA S&P 500 weight was about 1.439%
- TSLA's previous weight for the Q3 rebalance (as of Aug 18, 22) was ~2.096%
Now this
next part is conjecture: S&P 500 index funds will rebalance by selling approx 2.096/1.439 = 45% percent of the TSLA holdings over 3-5 trading sessions centered around the rebalance date (Fri, Dec 16, 2022). That's on the order of 100M shares of TSLA.
Most Index Funds will trade (rebalance) at the Closing Cross on Fri, Dec 16, 2022. That makes today's volume (already 136M shares by 2:15 pm) the 'jockeying' before the main event.
Note that I do not
KNOW this, and that
@mongo has made a strong case that the daily change in index weights due to SP movements naturally rebalances the index. He may well be right, and there is no issue this week.
However, I persist because the available evidence has lead to successful predictions of strong volume on rebalancing days (typically, extreme volume at the Closing Cross on the rebalance date). So again, I don't
know, I'm just following the evidence.
So what is the financial motivation for large hedge funds to beat down TSLA ahead of the S&P 500 rebalancing? They
know that a large number of shares
will change hands in the week of the rebalancing. If they can drive down the SP before the rebalance date, then they create their own bargain price on a large number of shares. All they have to do afterward is take their boot off the throat of TSLA, selling into the rising SP for a tidy and risk-free profit.
Anyway, I predicted this months ago now, so we'll see if events match the theory. But the puppeteers will not be exposed by this little drama, since they pull all the strings (and they own the theatre).