The biggest business that qualified for inclusion in the S&P 500 was AppLovin.
Finally, Robinhood Markets Inc. received approval, and later this month it will enter the S&P 500.
The financial technology business (HOOD), AppLovin Corp. (APP), and Emcor Group Inc. (EME) will all be included in the index before the market opens on September 22, according to a statement released late Friday by S&P Dow Jones Indices.
On the stock-market benchmark, those businesses will take the place of MarketAxess Holdings Inc. (MKTX), Caesars Entertainment Inc. (CZR), and Enphase Energy Inc. (ENPH).
Some of the biggest American corporations are included in the S&P 500 SPX, but the index committee has discretion over which U.S.-based companies are included as long as they satisfy a number of requirements, including having a market capitalization of at least $22.7 billion, a float market capitalization of at least $10.25 billion, and “financial viability.” Companies must have turned a profit on a GAAP basis in the most recent quarter and when comparing the total of the previous four quarters in order to demonstrate financial viability.
There are several benefits to being in the S&P 500, such as the compelled attention of fund managers who follow the index and the symbolic badge of legitimacy that comes with belonging to a select group.
Although the committee made no modifications at the time, others believed Robinhood would be cut in the preceding anticipated quarterly rebalance. Additionally, when it performed a number of ad hoc swaps to adjust for recently closed component mergers, it did not select the online brokerage. According to Stephens statistics, Robinhood was the third-largest qualifying business that was not yet included in the index.
In Friday’s after-hours trading, Robinhood’s stock was up 6.6% as a result of its inclusion.
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In contrast, AppLovin was the biggest qualifying name based on market capitalization, which at the closing was $166 billion. During the extended session, the company’s shares, which produce technology for app monetization, increased by 6.5%. The announcement caused Emcor, a company that offers construction and maintenance services, to notice a 2.1% increase in its stock price.
AppLovin is categorized as information technology (XX:SP500.45), Emcor is in the industrials sector (XX:SP500.20), and Robinhood is in the financials sector (XX:SP500.40) of the S&P 500.
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Among the qualified applicants, Strategy Inc. (MSTR), formerly known as MicroStrategy, came in second by market capitalization but was not selected for the index. Melissa Roberts, managing director of Stephens, stated that it was newly eligible since the software company and well-known bitcoin (BTCUSD) holder had just passed the “financial viability” test.
Astera Labs Inc. (ALAB), a semiconductor company that has surpassed the market-cap threshold, and Pure Storage Inc. (PSTG), whose stock has increased 42% in the past month alone and is a contender for a promotion from the S&P MidCap 400 MID due to that increase in value, were among the other newly eligible names. Neither of those businesses was selected either.
According to an analysis by S&P Dow Jones Indices that examined data from 1995 to 2023, approximately 90% of the nearly 800 S&P 500 member changes have occurred at other times, even though the quarterly rebalances receive a lot of attention because they usually follow a schedule, with announcements usually occurring on the first Friday of the last month of the quarter, before changes go into effect two weeks later.
Prior to the announcement on Friday, Roberts mentioned that “20 S&P 1500 stocks that are M&A targets, and will drive necessary index changes.” Even if the date falls outside of the quarterly rebalance rhythm, those adjustments often occur when deals conclude.
