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Why Twitter Joining the S&P 500 Is Unusual

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Exposure to elite investors

Twitter (TWTR) has joined the S&P 500, replacing Monsanto in the widely watched index. For company executives, being included in the S&P 500 Index is a great honor. Being part of the S&P 500 also means Twitter has increased the demand for its shares as well as its exposure to elite investors. Mutual and index funds that track the S&P 500 will have to add Twitter stock to their holdings.

Twitter shares soared to a multiyear high on news that the stock was being included in the S&P 500.

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Twitter reported its second consecutive profitable quarter in April

Twitter’s inclusion in the index seems unusual because companies joining the index typically have a track record that Twitter lacks. Companies are supposed to have posted profits in four consecutive quarters before they can be considered for a spot in the S&P 500, according to the Wall Street Journal. The first quarter was only Twitter’s second consecutive profitable quarter. Before that, the company had been reporting losses since going public in late 2013.

Twitter reported a profit of $61 million in the first quarter compared to Facebook’s (FB) $5.0 billion profit and Alphabet’s (GOOGL) $9.4 billion profit in the same period. Snap (SNAP) and Yelp (YELP) suffered losses of $385.8 million and $2.3 million, respectively, in the first quarter.

Netflix added to the S&P 100

While Twitter replaced Monsanto in the S&P 500, Netflix (NFLX) was picked to replace Monsanto in the S&P 100. Monsanto recently agreed to be acquired by German pharmaceutical and chemical giant Bayer AG.

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