The S&P 500 is gearing up for its quarterly game of musical chairs. The index, a VIP list of America’s top companies, might see new faces this month. AppLovin, Robinhood Markets, Cheniere Energy, and Interactive Brokers are warming up in the bullpen, hoping to snag a seat when the music stops.
On Friday at 5:15 p.m. ET, the S&P Dow Jones Indices will drop the news. Any changes will kick in before trading starts on June 23. Think of it as a stock market reality show where the stakes are high and the drama is real.
AppLovin, with a hefty $135 billion market value, leads the pack. Interactive Brokers follows at $87 billion, while Robinhood and Cheniere trail at $63 billion and $54 billion, respectively. These companies are the cool kids on the block, but will they get an invite to the S&P 500 party?
Getting into the S&P 500 is a big deal. It’s not just bragging rights; it’s a ticket to more stock purchases by index funds. These funds, which own over a quarter of S&P 500 stocks, have to buy shares of new additions, often sending prices soaring.
The S&P 500 doesn’t just pick names out of a hat. Since mid-2022, it’s been tweaking its roster every quarter, adjusting weights based on stock buybacks or new share issuances. It’s a numbers game, and the S&P committee plays it with a sharp pencil.
Other companies are eyeing the S&P 500 stage too. Ares Management, Flutter Entertainment, and Carvana, all valued over $50 billion, are in the mix. Smaller contenders like LPL Financial Holdings, First Citizens Bancshares, and Markel are also hoping for a shot, but they’re playing in a tougher league.
Not everyone gets to join the club. Limited partnerships, closed-end funds, and ETFs are stuck on the sidelines. Big players like Enterprise Products Partners and Energy Transfer can only dream of S&P 500 glory due to their corporate structures.
Bitcoin darling MicroStrategy, worth $105 billion, might seem like a shoo-in. But the S&P committee might see it as a Bitcoin piggy bank rather than a real business. Its tiny software side hustle doesn’t help its case.
Back in March, the S&P 500 welcomed DoorDash, TKO Group, Williams-Sonoma, and Expand Energy. DoorDash strutted in with a $90 billion valuation, while the others snuck in with market caps between $22 billion and $32 billion. Coinbase also crashed the party in May, replacing Discover Financial Services after its acquisition.
To join the S&P 500, companies need a market value of at least $20.5 billion. They also have to be profitable under GAAP rules for the past four quarters and the most recent one. It’s a high bar, but it keeps the riffraff out.
Tech giants Snowflake and Roblox, despite market caps over $60 billion, might trip over the profitability hurdle. Investors love their non-GAAP numbers, but the S&P 500 sticks to the strict GAAP playbook. No creative accounting allowed here.
On the flip side, some companies might get the boot. Caesars Entertainment, Enphase Energy, Mohawk Industries, Invesco, and APA are the smallest by market cap. They’re sweating bullets, hoping to keep their S&P 500 badges.
The market is buzzing with anticipation. Robinhood’s stock jumped 3.27% on speculation alone, while AppLovin ticked up 0.91%. Cheniere dipped 0.33%, and Interactive Brokers climbed 2.42%, showing investors are already placing their bets.
Bank of America analysts are hyping Robinhood as a “prime candidate.” They also like Interactive Brokers for a possible jump from the S&P 400. Posts on X echo the excitement, with users like @wallstengine and @ycharts naming these stocks as ones to watch.
But hold the confetti—nothing’s set in stone. The S&P committee loves its discretion, and surprises are part of the game. Just ask the companies that thought they were in last quarter only to be left out in the cold.
This rebalancing isn’t just about who’s hot and who’s not. It’s a chance for passive funds to shuffle billions in assets. The SPDR S&P 500 Trust ETF alone, with $600 billion in assets, could spark a trading frenzy.
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