Why Aren't These 4 Stock Giants in the S&P 500?
The S&P 500 Index includes 500 of the biggest companies in the U.S. market. But for various reasons, some large companies have gotten left out of the benchmark index. Let's look at four of the largest ones and try to figure out whether Standard & Poor's will remedy their omission in the near future.
With a market capitalization of more than $65 billion, Facebook erupted onto the public markets last year to great fanfare and even greater disappointment. Yet despite the social-media giant's woes, the company has been slowly getting itself onto some major market benchmarks, most notably the Nasdaq 100 index.
For Facebook to get into the S&P, current standards require that the company be "seasoned for six to 12 months." With the company coming up on its one-year IPO anniversary, Facebook should expect to be in investors' index portfolios in the very near future.
Las Vegas Sands
As a worldwide casino gaming giant, Las Vegas Sands has a $46 billion market cap, which would easily be enough to put it into the top 100 companies, let alone the top 500. But during the 2008 market meltdown, the stock traded as low as $1.38 per share, bringing its market cap down to small-cap territory.
Another key reason Las Vegas Sands hasn't regained admittance to the S&P 500 probably has to do with CEO Sheldon Adelson's substantial insider stake in the company. S&P prefers that companies have ample shares constituting the public float in order to meet index-fund demand, and with less than half of its outstanding shares actually available for trade, Las Vegas Sands may get left off the benchmark index for a while unless Adelson decides to divest himself of his big holdings.
GM's bankruptcy in 2009 resulted in a huge reorganization that included having the U.S. Treasury hold a substantial stake in the automaker's new stock. Although the Treasury has made some sales of stock, it still owns nearly $8 billion in GM -- not quite a fifth of the automaker's overall market cap. Other parties to the bankruptcy proceeding, including auto unions, also hold big share positions.
The result is that of GM's outstanding shares, barely 40% are available to investors. Until the Treasury and other parties sell off more of their positions, GM is unlikely to gain admittance to the S&P 500.
Cloud-computing giant VMware is an example of how corporate structures can give individual-stock investors opportunities that index funds lack. As a roughly 80%-owned subsidiary of EMC,VMware lacks a substantial float, which makes it unlikely that the stock will ever get into the S&P as long as EMC retains its stake.
Keep your eyes on Facebook
Of these four stocks, Facebook is the most likely to find itself part of the S&P in the near future. As lockup expirations have increased its float, its high market cap and importance in the social-media space make it a logical candidate for addition in the near future. The other three companies will need insiders to take action to find their way into the S&P 500.
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The article Why Aren't These 4 Stock Giants in the S&P 500? originally appeared on Fool.com.Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends Facebook, General Motors, and VMware and owns shares of Facebook and VMware. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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