Andrew Bary

AppLovin, Robinhood Markets, Cheniere Energy, and Interactive Brokers top a list of potential additions to the S&P 500 when the index's quarterly rebalancing occurs later this month.

An announcement of any changes to the S&P 500 index components is likely to come around 5:15 p.m. ET on Friday. Any additions and subtractions to the index likely would take effect before the start of trading on Monday, June 23.

Since mid-2022, S&P Dow Jones Indices has made changes to the S&P 500 and other indexes it manages each quarter in conjunction with the rebalancing, which involves adjusting the weight of each component based on changes in shares outstanding -- a reflection of stock buybacks and any share issuance.

AppLovin, Robinhood, Cheniere, and Interactive Brokers are four of the largest U.S.-domiciled companies ranked by market value that aren't in the S&P 500.

Inclusion in the S&P 500 is highly desired by most corporate management teams because of the prestige and buying that comes from index funds that probably own more than a quarter of the stocks in the index. Stocks can rise on news of addition to the S&P 500 and in the run-up to inclusion.

S&P Dow Jones Indices uses discretion in adding and dropping components from the S&P 500, as well as the S&P MidCap 400 and S&P SmallCap 600 indexes.

It often looks to large companies when making an addition to the S&P 500. AppLovin has a market value of $135 billion; Interactive Brokers has $87 billion; Robinhood has $63 billion; and Cheniere has $54 billion. Other possible additions include LPL Financial Holdings, First Citizens Bancshares, and Markel.

S&P doesn't allow limited partnerships, closed-end funds, or ETFs into the S&P 500. That prevents big pipeline operators Enterprise Products Partners and Energy Transfer from entering the index.

Bitcoin investor MicroStrategy, which is valued at $105 billion, probably won't make the cut despite its huge market value because S&P may view the company as more of a closed-end fund that owns Bitcoin rather than a business with substantial operations. The company's small software business is worth a tiny fraction of its market value.

In March, four companies were added to the S&P 500 in conjunction with the quarterly rebalancing: DoorDash, TKO Group, Williams-Sonoma, and Expand Energy. DoorDash is large with a $90 billion valuation, but the other three companies were in the $22 billion to $32 billion range.

Cryptocurrency exchange Coinbase Global was added to the S&P 500 in May, replacing Discover Financial Services, which was acquired by Capital One Financial.

For inclusion in the S&P 500, companies need to have a market value of at least $20.5 billion and be profitable on a GAAP basis for the past four quarters cumulatively and in the most recent quarter, according to the latest guidelines.

The earnings test could nix tech companies with large market caps like Snowflake (over $70 billion) and Roblox ($61 billion) that aren't profitable on a GAAP basis. Investors value the two companies on non-GAAP earnings or free cash flow that typically adds back employee stock compensation, which is properly treated as an expense in GAAP accounting.

The smallest companies by market capitalization are most vulnerable to deletion from the S&P 500. The five smallest by market value are Caesars Entertainment, Enphase Energy, Mohawk Industries, Invesco, and energy producer APA, formerly Apache.

Write to Andrew Bary at andrew.bary@barrons.com

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(END) Dow Jones Newswires

June 04, 2025 12:41 ET (16:41 GMT)

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