Robinhood, AppLovin Could Soon Join S&P 500 as Hess Deal Creates Opening in Index

Hess is being acquired by Chevron after the energy company won arbitration with rival Exxon. (Luke Sharrett/Bloomberg)

Robinhood Markets or AppLovin could gain admission to the S&P 500 index now that an opening has been created with Chevron acquisition of Hess.

There has been ongoing speculation that Robinhood and AppLovin could join the S&P 500 because they are the largest U.S. companies based on market capitalization that aren’t already in the benchmark index. AppLovin is valued at $123 billion and Robinhood at $93 billion.

Both stocks were higher in early trading Friday, with AppLovin up 2.5% at $373 and Robinhood 4.4% higher at $110. Index addition speculation could be a catalyst.

Both missed the cut recently when S&P Dow Jones Indices, which oversees the S&P 500 index, added Trade Desk to the benchmark, replacing Ansys, which was purchased by Synopsys. Trade Desk joins the S&P 500 today.

Hess isn’t officially out of the S&P 500 yet. S&P Dow Jones Indices will announce late Friday the date when Hess will leave the S&P 500. An announcement of a replacement for Hess, a former constituent in the S&P 500, could come at the same time. S&P Dow Jones Indices announced the Trade Desk addition on July 14, the same day Synopsys said it would close the Ansys deal on July 17.

S&P Dow Jones Indices has considerable leeway in which companies it adds to the S&P 500, and it generally doesn’t disclose why particular ones are added. But it usually gets around to adding the largest companies that aren’t in the index. Trade Desk, which operates an online ad platform, wasn’t high on the list of potential candidates when it was added.

Besides Robinhood and AppLovin, other candidates for admission to the index include Carvana, Ares Management, and Cheniere Energy. Those three companies are among the largest companies not in the S&P 500.

Cheniere has a shot because it’s an energy company and has a similar market value to Hess at around $50 billion. Cheniere operates a large liquefied natural gas facility and is a big exporter of the fuel. Its stock was up 3.7% to $240 in early trading.

S&P Dow Jones Indices will sometimes replace a company with one in the same industry.

It’s worth noting that technology and financials are underrepresented in the index relative to their weighting in the overall stock market, which could mean a tech or financial company will be added.

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