Tesla Inc. shares slid on Tuesday after the electric-vehicle maker missed out on being included in the S&P 500 Index, taking investors who had bet on its entry to the benchmark by surprise.

Tesla shares fell as much as 20 per cent on Tuesday, the biggest one-day loss since early February. Declines started premarket and worsened as General Motors Co. said it would take a US$2 billion equity stake in Nikola Corp. and partner with the fledgling truck maker to engineer and manufacture its Badger pickup. The news lifted Nikola shares by 46 per cent while GM rose 8 per cent.

Ahead of the S&P’s Friday announcement, Tesla’s price had largely reflected the assumed inclusion, said Baird analyst Ben Kallo, who called the decision “a relatively surprising development.” Instead of Elon Musk’s Tesla, S&P Dow Jones Indices added online retailer Etsy Inc., chip gear maker Teradyne Inc. and medical technology firm Catalent Inc.

“We think shares were reflecting expectations for substantial passive inflows,” with an estimated US$4.5 trillion of assets indexed to the S&P 500, Kallo wrote in a note Tuesday. “We think the stock could be under pressure following the delay of S&P 500 inclusion, particularly from investors who bought ahead of the announcement expecting an opportunity to sell to passive funds.”

Kallo said he still expects Tesla will eventually be added to the benchmark, and the company’s “Battery Day” event planned for Sept. 22 could be a positive catalyst.

Tesla’s failure to make it into the S&P 500 may be connected to “question marks about the sustainability of regulatory emission credit sales which are currently underpinning earnings,” said Michael Dean, an analyst with Bloomberg Intelligence.

Tesla has soared more than 300 per cent this year, making it the second best performance in the Nasdaq 100 Index behind Zoom Video Communications Inc. The carmaker reported its fourth quarterly profit in a row in July and its much-hyped Battery Day may also have boosted optimism since many investors expect the company to unveil new technologies that day. The relentless rally has swelled the firm’s valuation, which now exceeds that of Toyota Motor Corp., General Motors, Ford Motor Co. and Fiat Chrysler Automobiles combined.

Tesla shares entered correction territory last week, following news of the company’s second-largest shareholder cutting its stake, as well as the market slowly digesting Tesla’s plan to sell as much as US$5 billion in shares.

--With assistance from Kristine Owram and Crystal Kim.