Robinhood’s shares sold off on Monday after the online brokerage was left out of the latest quarterly rebalance of the S&P 500, disappointing many investors who had speculated that it could be added to the prestigious index.
Stock Reaction to S&P 500 Decision
Shares of Robinhood dropped 2% during Monday’s session, reversing some of the strong momentum the stock had shown in recent days. Just last Friday, Robinhood’s stock rallied 3.3%, helping to bring last week’s gain to more than 13%. However, S&P Dow Jones Indices announced after the bell that Robinhood would not be included in the rebalance, leaving its spot on the index unchanged.
Speculation and Missed Opportunity
Prior to the announcement, there had been much speculation about Robinhood’s chances of making it into the S&P 500. In fact, Bank of America had recently named Robinhood a top candidate for inclusion in the index during the upcoming June reshuffling. The S&P 500 rebalance, typically occurring on the third Friday of the last month of a quarter, often leads to billions of dollars in trading activity as funds that track the index are required to buy shares of the newly added companies. This type of inclusion can provide a significant boost to a company’s stock price.
Recent Gains and Market Comeback
Despite the setback, Robinhood has had a strong comeback this year, with shares up a remarkable 97%. The online brokerage reached a fresh record high last week, benefiting from a rebound in stock market. Robinhood had struggled in recent years, particularly after the 2021 GameStop trading frenzy and the subsequent collapse of FTX, which led to a sell-off in digital assets. However, the company’s recent performance suggests that it is regaining favor among investors.
Looking Ahead
While missing out on S&P 500 inclusion is a blow, Robinhood’s impressive year-to-date performance indicates that the company is on a strong path to recovery. Whether or not it secures a spot in the future remains uncertain, but for now, Robinhood continues to benefit from a broader market rebound.
