By Emily Bary
Robinhood misses out on S&P 500 inclusion once again, as Square parent company is chosen to replace Hess
The S&P 500 is getting another shakeup, this time with the addition of Block Inc.
S&P Dow Jones Indices, which determines membership of the benchmark index SPX, said after the close of Friday trading that Block (XYZ) will soon be joining the ranks of S&P 500 components. The change will be effective before Wednesday’s open – with Block taking the spot vacated by Hess Corp., which was just acquired by oil giant Chevron Corp. (CVX) after a lengthy dispute with rival Exxon Mobil Corp. (XOM)
This marks the second change to the S&P 500 announced this week, and the second to follow a deal closure. Late Monday, S&P Dow Jones Indices announced that Trade Desk Inc. (TTD) would get a place in the index after Ansys Inc. (ANSS) got purchased by Synopsys Inc. (SNPS) That change took place before Friday’s open.
Block’s stock was up more than 9% in Friday’s after-hours action.
Wall Street has been speculating about Block – the parent company of Square and the Cash App – as a potential S&P 500 candidate since last year. In December, Bernstein analyst Harshita Rawat penned a note to clients titled “Is S&P 500 inclusion imminent, and does it matter?” She noted that the company met the final requirement for consideration in the first quarter of 2024.
Looking at data from 2010 to that point in late 2024, Rawat flagged that stocks tended to beat the S&P 500 by a wide margin in the year leading up to their inclusion announcements. The cumulative relative return was just 4% in the five days following the announcement, however, “trailing off to flat returns by six months postannouncement,” she wrote at the time.
That said, investors see benefits for a company to joining the S&P 500, since funds tracking the index will have to give their stocks more consideration. Entry into the S&P 500 may also give a company street credit of sorts.
The index committee at S&P Dow Jones Indices typically makes scheduled changes to the S&P 500 once a quarter, but also makes unscheduled changes at other times, such as when a component gets acquired. Investors sometimes try to guess which companies will get the nod, since there is a finite group of businesses that meet the criteria around market capitalization, profitability, domicile and other factors. Beyond that, it’s up to the index committee’s discretion when deciding new members.
While Block has been waiting its turn for a spot in the S&P 500, some may have suspected Robinhood Markets Inc. (HOOD) would get the nod first. The online brokerage is a flashier stock these days and the company is fast approaching a $100 billion market capitalization. Block’s market cap, meanwhile, is almost $44 billion.
Robinhood’s stock was off fractionally in Friday’s extended session. Some investors were hopeful that the company would get its S&P 500 moment in June, when the committee often makes quarterly adjustments, but S&P Dow Jones Indices opted against any adjustments then.
-Emily Bary
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