Will Paramount Stay in the S&P 500? Here’s an Update On the Situation.

Paramount stock may stay in the S&P 500 after all. (PATRICK T. FALLON/AFP via Getty Images)

Skydance Media is set to close on its deal to purchase a controlling interest in Paramount Global on Thursday raising questions about whether the company will remain in S&P 500 . S&P Dow Jones Indices hasn’t announced any replacement for Paramount, and it’s possible it will remain right where it is.

Many investors assumed that Paramount would be dropped from the index due to its small market capitalization, opening the way for potential additions like Robinhood Markets or AppLovin.

They had good reasons for assuming that. After the deal, the market value of Paramount, which owns CBS, a movie studio, a group of cable networks, and operates a streaming service, should be around $11 billion, half the current minimum for new entrants into the index of $22.7 billion.

The Paramount public float will be considerably less than $11 billion since Skydance will own about 70% of the equity in Paramount, leaving about 300 million of new Paramount nonvoting shares outstanding worth around $3.5 billion based on Paramount’s current stock price of around $11.20.

A sub-$22.7 billion float, however, is no guarantee of getting dropped from the S&P 500, however. In fact, S&P Dow Jones Indices, which oversees the S&P 500, has retained many companies in the index with market values under that level. The smallest members of the index— Enphase Energy and Caesars Entertainment —have market values of $5 billion or less.

And Barron’s received Tuesday a notice purportedly sent to certain index subscribers of S&P Dow Jones Indices on Monday that suggests that Paramount will stay in the index——at least until the S&P 500’s quarterly rebalancing in September.

“For index purposes, SPDJI will treat PARA as acquiring PARAA. PARAA will be dropped using the last traded price on its primary exchange. PARA to be renamed PSKY. Other Share/IWF updates, if any, at next quarterly rebalance,” the notice says.

Barron’s can’t confirm the authenticity of the notice and S&P Dow Jones Global Indices had no immediate comment.

The notice, written in index jargon, appears to state that SPDJI—S&P Dow Jones Indices—will drop Paramount’s class A voting shares from the S&P 500, apparently because Skydance is purchasing those shares from the Redstone family and likely from public holders as well. The ticker will change to PSKY, as reported by Paramount.

IWF stands for Investable Weight Factor, which is the effective percentage of a company’s shares that freely float. The number is between zero and one.

S&P Dow Jones Indices regularly adjusts company market capitalizations by their float in setting their weighting in the S&P 500 and other indexes.

Paramount stock was off 6% at $11.01 in late morning trading Wednesday.

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