S&P Global surprised markets as it made three notable additions and deletions to the S&P 500 index, including adding AppLovin and Robinhood. These changes will be implemented prior to the opening of trading on September 22. Their contributions to value creation, jobs, and stock market booming have been notable. Their inclusion signals a dramatic change in one of the most quoted, tracked, and monitored indices in all of America.
AppLovin, the mobile marketing platform, returns to these pages a few months after we urged readers not to IPO from Fuzzy Panda Research in March. That investment firm had previously advised against adding AppLovin to the S&P 500 index. The company is preparing to enter the growing pool of market players already established. Yet, it appears that this very smart recommendation has been lost.
At the same time, Robinhood, the new favorite trading app of college students everywhere, was largely shaking during last week’s market turmoil. In June, shares of Robinhood fell 2% after a report indicated that fewer-than-expected investors had taken the plunge. On top of that, Robinhood was removed from that month’s S&P 500 index quarterly rebalancing. This strategic move has raised questions about the future of its inclusion within that influential index.
For the better or worse, including AppLovin and Robinhood will certainly alter investors’ perception towards these stocks. It will additionally impact how much trading activity in them is less productive. Analysts have speculated that being added to the S&P 500 would double or triple Robinhood’s trading volumes. Fifth, they believe inclusion in this lofty index will increase the company’s visibility in the public markets, catching the eye of institutional investors.
The changes by S&P Global are part of a regular re-evaluation of consumer facing companies included in the index. It’s usually the result of a regular assessment. Through this process, the index remains a true reflection of the larger market. These additions underscore the ongoing evolution of the technology sector. The reality is that companies can go from success to failure overnight, based on changes in market conditions or investor sentiment.