Shares of Robinhood Markets (HOOD) tumbled 5.18% in after-hours trading on Friday, giving back some of the gains it had accumulated throughout the week. The sharp decline comes as investors digest news of a major shareholder reducing its stake and reassess the company's potential inclusion in the S&P 500 index.

Cathie Wood's Ark Invest, a significant holder of Robinhood stock, reportedly trimmed its position in the company. According to trade notifications, Ark sold 229,293 HOOD shares from its ARK Innovation ETF (ARKK) as part of a broader portfolio rebalancing. This move coincides with Ark's substantial purchase of newly listed Circle (CRCL) shares, suggesting a shift in the firm's crypto-related holdings.

The sell-off also follows a week of speculation about Robinhood's potential inclusion in the S&P 500 index. The stock had rallied earlier in the week, with some analysts identifying it as a strong candidate for addition to the benchmark index. However, the sharp after-hours decline may indicate that some investors are tempering their expectations or taking profits ahead of the official announcement, which is typically made after the market close on Fridays.

Despite the after-hours plunge, Robinhood's stock had been on a tear, rising nearly 14% over the past week. The company's growing crypto trading platform and its position as a potential beneficiary of increased retail trading activity have contributed to investor interest. However, the volatile nature of the stock and its sensitivity to regulatory news and market sentiment continue to create significant price swings.