Shares of Robinhood Markets slid significantly on Monday after the online brokerage failed to gain a coveted spot in the S&P 500 index during its latest quarterly rebalancing. The stock fell as much as 6% at the opening bell, unwinding a recent rally built on widespread anticipation of its inclusion in the prestigious benchmark.
Investor optimism had been mounting for weeks, fueled by Wall Street analysts who identified Robinhood as a “prime candidate” for entry into the S&P 500. This speculation drove shares to their highest point since the company’s 2021 initial public offering, with the stock gaining over 13% last week alone.
However, S&P Dow Jones Indices announced late Friday that it would make no changes to the index’s composition, abruptly halting the stock’s momentum.
The decision had an immediate impact when markets opened Monday morning, with shares falling about 5% in premarket trading before extending losses. The disappointment was shared by other hopefuls, such as the marketing platform AppLovin, which also saw its stock dip after being passed over.
For a company to be eligible for inclusion, it must meet several criteria, including a market capitalization of at least $20.5 billion. Robinhood comfortably exceeded this with a valuation of approximately $66.1 billion as of Friday’s close.
Gaining entry into the S&P 500 is a major catalyst for a company’s stock, as it forces passive investment funds and ETFs that track the index to purchase its shares. This can result in billions of dollars of buying activity, as seen last month when crypto exchange Coinbase was added to the index and experienced a subsequent surge in its stock price.
Despite this setback, Robinhood shares have still more than doubled in value this year amid a broad recovery in the stock and cryptocurrency markets.
