Action Investments Limited: Uber stock rises as the company tries to join the S&P 500 index

Uber Technologies (UBER) shares rose over two percent Monday to a more than two-year high after S&P Dow Jones Indices announced that the company will be included in the S&P 500 Index—a move that could sustain the stock for much longer than a 1 day
SHEUNG WAN, Hong Kong - Dec. 8, 2023 - PRLog -- S&P Dow Jones said on Friday that it would add Uber to the world's most widely watched stock market index beginning Dec. 18. Manufacturing business Jabil (JBL) and construction supplies supplier Builders FirstSource (BLDR) also will join the index that day. Sealed Air Corp. (SEE), Alaska Air Group (ALK), and SolarEdge Technologies (SEDG) will be replaced by the three new entrants.

On heavy trading volume, Uber shares rose as high as $60.88, up $3.53. Since June 2022, their value has approximately quadrupled.

In the future, the inclusion of Uber in the S&P 500 may provide its shares with greater stability than they have had since the firm went public in May 2019.

Increased Inclusion

The stock is likely to enjoy some advantages because index mutual funds and exchanged-traded funds (ETFs) tracking the S&P 500 now must routinely buy shares of Uber along with other index constituents when investors buy shares of S&P 500 index funds and ETFs.

Index fund and ETF managers whose portfolios track the S&P 500—an index whose stocks have a minimum market capitalization of $12.7 billion and account for roughly 80% of the available market cap in the US stock market—will have to start buying Uber shares when the index is reconstituted later this month.

Of course, when investors purchase shares of S&P 500 index funds and ETFs, Uber's shares will encounter proportional pressure to sell as well.

Still, the implications of S&P 500 inclusion clearly skew toward the good. At the beginning of this year, U.S. funds and ETFs following the S&P 500 had $5.7 trillion in assets—and that was before the index's year-to-date climb of 19%.

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