Shares of Paramount Global (PARAA) tumbled 7.47% in pre-market trading on Thursday, as investors reacted to concerns about the company's potential removal from the S&P 500 index following its pending sale to Skydance Media.

The sharp decline comes amid speculation that Paramount could be moved from the S&P 500 to the S&P MidCap 400 index due to its lower market capitalization. This potential shift is tied to the company's impending sale to Skydance Media, which is set to close on August 7. Under the terms of the deal, the combined entity will trade under the new ticker "PSKY," with Skydance owning approximately 70% of the equity.

Market analysts suggest that the large stake to be held by Skydance could significantly reduce Paramount's float-adjusted market cap, potentially making it a candidate for index demotion. The S&P 500 index committee may use the closure of the Skydance deal as an opportunity to reevaluate Paramount's position within the index. This uncertainty has likely triggered the pre-market sell-off as investors anticipate potential forced selling by index funds if Paramount is indeed removed from the S&P 500.