Uber Is Now A Part Of The S&P 500. This Is The Meaning Of That.

The ride-hailing service Uber’s stock hit a 52-week high last week as the San Francisco-based company got ready to list on the S&P 500 on Monday. CEO Dara Khosrowshahi expressed his pride in the Uber team for being included in the S&P 500 on X. Fantastic way to start the weekend and resume construction on Monday!

There is no great surprise in the addition. The corporation is now the largest US company not included in the index, with a market value of over $127 billion.

Khosrowshahi and Uber have both had a successful year. The company has had record ridership, great quarterly earnings, and regulatory victories in the US and the UK. As of now, in 2023, its stock has increased by more than 150%.

The corporation was stepping on thin ice not so long ago. Cities and taxi unions were fighting to block its services, and its leadership was coming under fire. In 2022, the company’s shares dropped by almost 52% due to its lack of profitability.

Uber has achieved a great deal with its inclusion in the S&P 500, which rebalances every quarter. To be included in the index, which is monitored by funds with trillions of dollars in value, a firm must meet a number of requirements that demonstrate Uber’s growing power and stability in the market and solidify its position as a dominant force.

However, Uber’s participation has far-reaching effects outside of Wall Street. The reason for this is that a lot of people’s retirement accounts, such as IRAs, 401(k)s, and personal investment portfolios, are linked to S&P 500 index-tracking funds.

These funds and portfolios automatically purchase a company’s stock, such as Uber’s, when it joins the index, potentially increasing the stock price.

Since Dec. 4, when the S&P Dow Jones Indices first revealed that Uber would be included in the benchmark index, the company’s stock has already increased by around 10%. The stock is currently trading slightly below its all-time high, which was attained in February 2021, over two years ago.

S&P Dow Jones Indices committees typically assess companies based on predetermined standards, such as market capitalization, corporate earnings, and liquidity. Businesses that no longer fit those requirements are eliminated, and those that do are added.

Uber, Jabil, and Builders FirstSource will be added to the S&P 500 during this rebalancing, while Sealed Air, Alaska Air, and SolarEdge Technologies will be removed.

This kind of rebalancing is commonly referred to as a large liquidity event since it involves substantial volume trading in the stock market. Roughly $13 trillion is estimated to be linked to the S&P 500 by Standard & Poor’s. That’s significant, particularly in the latter few weeks of the year when trading activity tends to decline due to traders departing for the holidays.