The S&P 500 index constituents are adjusted again, but Robinhood still hasn't made it in

Advertising technology company Trade Desk unexpectedly gained a spot in the S&P 500 index, while the "top candidate"—the brokerage stock Robinhood, which has a larger market capitalization and has risen 168% this year—was once again left out. On Monday, S&P Dow Jones Indices announced that Trade Desk will replace Ansys in the S&P 500 index before the market opens on Friday. This adjustment is due to Synopsys's acquisition of Ansys, which is expected to be completed on Thursday. However, the much-watched Robinhood has once again missed out on this benchmark index. This news immediately triggered disappointment in the market, with Robinhood's stock dropping about 1% in after-hours trading; in contrast, The Trade Desk's stock surged 14%. The inclusion of Trade Desk surprised the market, as its market capitalization is only $37 billion, far below Robinhood's $88 billion. The latter's stock has soared 168% this year and is widely regarded as a popular candidate for index expansion, even being referred to as the “top candidate”. This is not the first time Robinhood has been left out. The company also failed to be included in the quarterly routine adjustment in June, when the index committee decided not to make any additions or deletions. After the last news of being left out, Robinhood's stock plummeted over 6% in after-hours trading. Market Capitalization Advantage Did Not Translate into Inclusion Eligibility Robinhood significantly outperformed Trade Desk in both market capitalization and stock price performance. With a market capitalization of $88 billion, Robinhood ranks as one of the largest companies not included in the S&P 500 index, more than twice the market cap of Trade Desk. In terms of stock price performance, the two companies have had completely different trajectories this year. Robinhood's stock has risen 168% year-to-date, while Trade Desk has fallen 36%. Trade Desk faced a sharp decline after its earnings report in February, plummeting 33% in a single day, marking its largest historical drop. Jefferies analyst James Heaney gave a negative assessment of the company's performance at that time, as the company acknowledged execution issues and Wall Street expressed concerns about competitive pressures it faces. Recently, institutional attitudes have shifted. Evercore ISI analyst Mark Mahaney raised Trade Desk's stock price target from around $68 to $90 at the end of June, calling it "one of the highest quality and most stable companies in the internet sector, providing an attractive opportunity to re-engage." Overall, the S&P Index Committee ultimately chose Trade Desk. The company is classified under the communication services sector, while the replaced Ansys belongs to the information technology sector, and this adjustment will slightly change the sector composition of the index. Index Effect Drives Fund Flows The adjustment of the S&P 500 index constituents is significant for the related companies. According to previous reports, index funds hold more than a quarter of the shares of S&P 500 constituents. Inclusion not only signifies the legitimacy of the company but also means that funds tracking the index must increase their holdings of the relevant stocks. The inclusion criteria for the S&P 500 index include market capitalization thresholds, profitability, and liquidity requirements, but the index committee has a certain degree of discretion when selecting new members. For Robinhood, the wait continues. Robinhood's Tokenized Stock Product Faces European Regulatory Storm Robinhood's recent tokenized stock initiative seems to have encountered obstacles. A previous article from Wall Street Insight reported that the U.S. online brokerage Robinhood recently launched tokenized stock trading in Europe, allowing European retail investors to purchase tokens linked to equity in unlisted companies like OpenAI and SpaceX. However, this move has not only faced strong opposition and warnings from OpenAI but has also attracted the attention of European regulators, with the Bank of Lithuania launching an investigation into Robinhood's stock token products. On July 3rd local time, OpenAI issued a statement on the social media platform X, clearly stating that the tokens offered by Robinhood do not represent company equity, and that the company neither participated in nor endorsed this product. "Any transfer of OpenAI equity requires our approval—we have not approved any transfers," the company warned