Wall Street analysts and investors were confident that Tesla, a US automaker, would be listed in the S&P 500 after the company posted a fourth straight profit in July in July, removing a major impediment to its potential inclusion in the benchmark stock index.
In a surprise announcement, S&P Dow Jones Indices opted to add online handicraft retailer Etsy Inc, semiconductor equipment manufacturer Teradyne Inc and pharmaceutical technology company Catalent Inc. to the S&P 500 instead
The three companies included in the S&P are much smaller in capitalization compared to Tesla, but have more stable margins.
As a result, Tesla quotes fell 15.21% to $ 354.42 per share on NASDAQ.
With a market cap of around $ 390 billion, Tesla is almost 10 times the combined market value of Etsy, Teradyne, and Catalent, which is around $ 40 billion.
Tesla's recent rally was fueled by its blocking quarterly results, as well as bets that it will be added to the S&P 500, driving massive demand for its shares from index funds tracking the benchmark.
Shares in another electric car maker Nikola Corp jumped 35% on Tuesday after General Motors Co announced it was acquiring an 11% stake in the company.