Paramount Global (PARA) shares plummeted 6.62% in pre-market trading on Thursday, as investors reacted to speculation about the company's potential removal from the S&P 500 index. The sharp decline comes in the wake of Paramount's pending sale to Skydance Media, which is set to close on August 7th.

The upcoming merger has sparked discussions among market analysts about possible changes to the S&P 500 index composition. Melissa Roberts, an analyst at Stephens, suggests that the deal's closure could provide an opportunity for the S&P 500 index committee to make adjustments. Given Paramount's current market capitalization of $9.5 billion, which is well below the $22.7 billion threshold for new S&P 500 entrants, there's a possibility that the newly formed entity (to be traded as "PSKY") could be moved to the S&P MidCap 400 index.

This potential index reclassification is likely driving the pre-market sell-off, as investors anticipate possible selling pressure from index funds that track the S&P 500. However, it's important to note that the S&P index committee has not made any official announcements regarding Paramount's status. The committee may choose to retain the stock in the S&P 500, considering Paramount's popularity and the fact that existing members are not immediately removed solely based on market cap thresholds. As the situation develops, investors will be closely watching for any official communications from S&P Dow Jones Indices regarding potential index changes.