Robinhood shares took a hit on Monday as the online brokerage was left out of the latest quarterly rebalance of the S&P 500. Despite months of speculation that Robinhood could earn a coveted spot in the benchmark index, the company was ultimately snubbed, causing its stock to drop more than 6% in morning trading.
Last week, there was anticipation that Robinhood could join the S&P 500 during the quarterly reshuffling, with Bank of America even naming it as a top candidate. However, the announcement from S&P Dow Jones Indices after the bell dashed those hopes, as the index remained unchanged.
The S&P 500 rebalance is a significant event that can trigger billions of dollars of trading activity and prompt passive funds to purchase shares of companies added to the index. This influx of buying from passive funds can have a substantial impact on a company’s stock price in the weeks following its inclusion in the index.
Coinbase, a crypto exchange, experienced a significant boost in its stock price after being added to the S&P 500 in a previous rebalance. The stock surged 24% in the trading session following the announcement.
Despite missing out on a spot in the S&P 500, Robinhood has seen a strong comeback this year, with its shares up nearly 90%. The online brokerage hit a new record high last week as both stock and crypto markets rebounded. After facing challenges following the GameStop trading frenzy and the collapse of FTX, Robinhood managed to regain investor confidence and drive its stock price higher.
Overall, while the exclusion from the S&P 500 may have caused a temporary setback for Robinhood, the company’s strong performance this year indicates that it continues to attract investors and build momentum in the market.
