Shashwat Chauhan
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By Shashwat Chauhan
(Reuters) -Shares of Robinhood Markets dipped 3% in premarket trading on Monday after S&P Dow Jones Indices made no changes to the S&P 500 membership following recent speculation that the online brokerage would be added to the index.
S&P Dow Jones Indices announced late on Friday that it would not be making any changes to the components of the benchmark S&P 500 as part of quarterly rebalancing.
Robinhood's stock rallied in recent weeks, touching its highest level since the company's 2021 market debut on Friday, as investors priced in a possible inclusion in the index.
Bank of America analysts earlier this month touted the company as the "prime candidate" to join the S&P 500.
Robinhood's shares were down 3.2% at $72.5 before the bell, while marketing platform AppLovin, which also rallied last week on bets of inclusion, dropped 3.3% to $404.
"When smaller companies are looking for inclusions in the S&P or any index, it means millions of dollars could potentially flow to them without a substantive event," said Phil Blancato, CEO of Ladenburg Thalmann Asset Management.
"So, speculative traders have to expect volatility because it is often the case that you'll see something like this happen where expectations are one thing and reality is another."
To be included on the index, a company has to be U.S. domiciled, listed on a prominent U.S. exchange and have a market capitalization of $20.5 billion or higher, among many other criteria.
Robinhood had a market valuation of $66.1 billion as of Friday's close, with shares more than doubling in value this year and trading well above its IPO price of $38 apiece.
Crypto-exchange operator Coinbase Global was the latest addition to the S&P 500 last month, making it the first digital asset player to be included in the index.
Stephens analyst Melissa Roberts said she expects Nippon Steel's acquisition of S&P 500 member U.S. Steel to be the next window for shake-up in the index members.
(Reporting by Shashwat Chauhan in Bengaluru; Additional reporting by Chuck Mikolajczak; Editing by Shreya Biswas and Maju Samuel)
