Will Paramount Leave the S&P 500 After Skydance Deal? Here’s What to Know.

Paramount Global’s deal with Skydance Media is set to close on Thursday. (Apu Gomes/Getty Images)

Skydance Media is due to close on its transaction to buy a controlling stake in index member Paramount Global on Thursday and a new addition to the S&P 500 could come soon—or maybe not.

The privately owned Skydance will own about 70% of the media and entertainment company after the deal, and Paramount could have too small a market value to remain eligible for inclusion in the index. Paramount’s market capitalization should be about $12 billion with its nonvoting shares now trading around $12 a share.

That market value is roughly half the $22.7 billion minimum market capitalization requirement for new additions to the S&P 500. There are many companies, however, with a market value under $22.7 billion in the index.

The public float in Paramount will be just $4 billion with roughly 300 million of the one billion or so outstanding shares in public hands.

It is possible that S&P Dow Jones Indices will keep Paramount Global in the S&P 500 index and potentially rebalance its weighting at the next quarterly rebalancing. At the time of this writing, S&P Dow Jones had not confirmed how it plans to treat Paramount and its place in the S&P 500. Barron’s will update this article and Paramount’s status in the S&P 500 as more information is made available from S&P Dow Jones Indices.

If an opening develops, leading candidates join the index include Robinhood Markets and AppLovin, the two largest U.S. companies not in the S&P 500. Barron’s wrote about the possibility of a replacement for Paramount last week.

Both companies were snubbed during recent additions to the index, including the most recent one announced on July 18, when Block replaced Hess after the energy company was purchased by Chevron.

AppLovin has a market value of $133 billion, and Robinhood weighs in at around $94 billion. S&P Dow Jones Indices, which oversees the S&P 500, usually gets around to adding the biggest companies not in the index but it has complete discretion about which companies get added and when.

Other companies with large market capitalizations and thus admission candidates include Carvana, Ares Management, Cheniere Energy, Flutter Entertainment, Veeva Systems, and Ferguson Enterprises.

Other potential candidates are Emcor and Interactive Brokers, the two biggest companies in the S&P MidCap 400 index.

S&P Dow Jones Indices could move Paramount to the S&P MidCap 400 index. If that happens, Emcor, Interactive Brokers, or another member of the mid-cap index could get elevated to the S&P 500 instead of other candidates.

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