New Stocks on the Block: How Stocks Join the S&P 500

Sometimes a stock moves because news befalls the company. But sometimes a stock moves because no news happened. And no news isn't always good news, especially if it means the company was overlooked for S&P 500 inclusion by the decisionmakers at the S&P Dow Jones Indices.

Investors in advertising technology firm AppLovin (APP) learned that the hard way when the stock wasn't added to the S&P 500^® index (SPX) in June 2025. Shares tumbled 8% over the following few sessions, and even a month later, it traded below where it had been pre-snub. Shares had rallied into the announcement as optimistic investors talked up chances for inclusion. 

Getting added (or removed) from the S&P 500 is a big deal, but it generally only happens four times a year, and there are membership criteria. To join, a company must have been profitable for the last four quarters as a whole and in the most recent quarter specifically with a market capitalization of at least $22.7 billion. It also must meet float and volume criteria. Companies need to be based in the United States and trade on one of several approved U.S. stock exchanges. 

Sometimes a company is added at other times due to market developments. For example, in July 2025, payments firm Block (XYZ) joined the index as energy firm Hess (HES) was removed after being purchased by Chevron (CVX).

S&P Dow Jones Indices, a business run by S&P Global (SPGI), typically announces its picks on the second Friday of March, June, September, and December, and the listings usually take effect after the close of trading the following Friday. 

AppLovin met the S&P Dow Jones Indices' metrics but got overlooked anyway. So did Cheniere Energy Partners (CQP), along with a couple other stocks that speculators had crowded into in hopes of inclusion. Cheniere shares lost ground after the disappointing news and remained lower a month later. 

Speculating each quarter on who's in and who's out may be fun for investors and analysts. But as APP's three-month chart below demonstrates, it can be dangerous and shouldn't be a major strategy for long-term investors.

Getting listed on the S&P 500 can help shares of a company, at least momentarily, often by simple mathematics. If a stock joins the index, most mutual funds and exchange-traded funds (ETFs) that seek to emulate the index buy shares of the new addition and remove shares of whichever companies were delisted. That means a quick burst of money that can raise the share price of the new kid on the block, like Pac Man eating an energy dot.

For instance, shares of Tesla (TSLA) rallied 60% in 2020 from the day before its inclusion announcement to its actual inclusion a month later. This type of leap is dramatic but not unheard of, considering that the price premium gained by inclusion can lower the cost of capital for companies, according to a 2021 study by the National Bureau of Economic Research.

Indexes like the S&P 500 and the Dow Jones Industrial Average ($DJI) can turn the market's complexity into a single number that can be tracked. That's valuable. But differences in the ways indexes are constructed can sometimes distort the data or place a lot of importance on certain stocks over others. Simply being added to an index doesn't mean a company has it made.