S&P 500 changes are imminent. Robinhood and these other stocks could join the index.

The S&P 500 is expected to announce its quarterly rebalance after Friday's close, with AppLovin (market cap of $140.9B), Interactive Brokers ($87.1B), and Robinhood ($63.8B) among the eligible companies vying for inclusion based on market capitalization and profitability criteria; inclusion typically boosts a company's stock as index-tracking funds are required to buy shares, while exclusion can lead to sell-offs.

Analysis

The S&P 500 is poised for its quarterly rebalancing, with an announcement anticipated after Friday's market close, creating a significant event for several eligible companies and investors. To qualify for inclusion, new entrants must generally possess a market capitalization of at least $20.5 billion and meet specific profitability criteria, though the S&P Dow Jones Indices committee holds ultimate discretion in selections. Inclusion typically boosts a company's profile and stock price due to mandatory purchases by index-tracking funds, as recently observed with Coinbase Global Inc.'s (COIN) addition, which was also seen as a positive signal for the crypto industry. Conversely, approximately 28% of current S&P 500 constituents fall below the $20.5 billion market cap threshold, yet historical data suggests only a few are removed each quarter, with the last rebalance featuring four entries and four exits. Key candidates for inclusion based on the provided list and their market capitalizations include AppLovin Corp. (APP) at $140.9 billion, Interactive Brokers Group Inc. (IBKR) at $87.1 billion, Southern Copper Co. (SCCO) at $75.4 billion, Carvana Co. (CVNA) at $74.0 billion, and Robinhood Markets Inc. (HOOD) at $63.8 billion. AppLovin, the largest eligible company, has substantially increased its market cap to over $140 billion from about $88 billion at the March rebalance announcement, despite facing short-seller scrutiny earlier in the year. Interactive Brokers was a strong candidate in the previous cycle but was not selected. Robinhood Markets' stock has surged approximately 19% over the past five days, potentially indicating investor optimism regarding its S&P 500 prospects. Other notable eligible firms include Vertiv Holdings (VRT), a data-center infrastructure company with a $43.0 billion market cap, and several fintech companies like Block Inc. (SQ). The rebalancing changes are scheduled to take effect after the close of trading on June 20.

Key Decisions for Investors

• Investors should closely monitor the S&P 500 rebalancing announcement expected after Friday's close, as newly included companies typically experience increased demand from index-tracking funds, while unselected candidates, particularly those with recent run-ups, may face short-term price declines.
• Consider the speculative nature of trading candidates ahead of the announcement; for instance, while Robinhood Markets' (HOOD) recent 19% rally might reflect market anticipation of inclusion, there is inherent risk if these expectations are not met, given the S&P committee's discretionary selection process beyond quantitative criteria like its $63.8 billion market cap.
• Evaluate the profiles of leading candidates such as AppLovin (APP), which has overcome prior controversies to reach a $140.9 billion market cap, and Interactive Brokers (IBKR), a persistently large eligible firm, recognizing that their inclusion is not guaranteed and the market impact will be contingent on the committee's final decision, which will be implemented on June 20.