Blackstone's recent addition to the S&P 500 has sparked curiosity among investors, raising the question of who might be the next to join this prestigious benchmark index. Blackstone, a behemoth in the asset-management world with over $1 trillion in assets, has long possessed the necessary size for inclusion, boasting a market capitalization of approximately $130 billion. To put it in perspective, the smallest companies within the S&P 500 have market caps of around $4 billion.
Previously, Blackstone faced hurdles that prevented its inclusion in the S&P 500. It was initially organized as a partnership, not a corporation, until it transitioned to the latter in 2019. Subsequently, its multi-class share structure posed another obstacle. However, in April, S&P announced its willingness to consider such firms. Following this announcement, it seemed only a matter of time before Blackstone's inclusion, possibly explaining the relatively modest response in Blackstone's stock, which saw a 3.6% increase on Tuesday.
Now that Blackstone has secured its place, the question arises as to whether other colossal alternative asset managers will follow suit. Apollo Global Management and KKR & Co. emerge as natural contenders, each boasting market capitalizations of approximately $50 billion. This possibility could further invigorate their shares, which have already experienced gains of over 30% this year. Patrick Davitt, an analyst at Autonomous Research, believes that Blackstone's inclusion "has to be good for the whole space, as it will force generalist portfolio managers to pay more attention."
Apollo, however, has previously emphasized that companies do not apply for inclusion; rather, they position themselves as eligible candidates and await the call. After finalizing its merger with retirement-services insurance firm Athene in 2022, Apollo stated that it had become "larger and more liquid" and now possessed a single share class, making it "eligible for inclusion in the S&P 500 index." In August, Apollo announced that it had met its final eligibility criteria, including reporting positive earnings under Generally Accepted Accounting Principles over the past four quarters.
Naturally, for a new entrant to join the S&P 500, an existing member must exit. Blackstone's inclusion was announced concurrently with Airbnb, which holds a market capitalization of roughly $90 billion. These two companies filled the vacancies left by Lincoln National and Newell Brands. On the horizon, there may be another significant departure in the form of Microsoft's acquisition of Activision Blizzard.
As the S&P 500 welcomes new members, there is a possibility of increasing competition. Other sizable companies not yet part of the index, as determined by the S&P's Completion Index (which excludes S&P 500 members), include Uber Technologies, boasting a $95 billion market capitalization and a profit trajectory that could align it for future inclusion.
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