Coinbase (COIN) Shares Soar in After-Hours Trading on S&P 500 Inclusion

Shares of cryptocurrency exchange Coinbase (COIN) experienced a significant surge in after-hours trading on Monday following the landmark announcement that the company will be added to the prestigious S&P 500 stock index.

Shares of cryptocurrency exchange Coinbase (COIN) soared in extended hours of trading on Monday after the company announced it will be joining the S&P 500 stock index.

This inclusion marks a pivotal moment for Coinbase and the broader digital asset industry, signaling increased mainstream acceptance and potentially ushering in a new wave of investor exposure.

New entrant to premier index

Coinbase is set to become a member of the S&P 500, which tracks 500 of the largest publicly traded US companies across various sectors, on Friday, May 19, before the market open.

It will be joining the index in place of Discover Financial Services (DFS), which is being acquired by Capital One.

With a market capitalization of nearly $53 billion, Coinbase, which trades on the Nasdaq exchange, will be among the largest companies in the S&P 500, rubbing shoulders with tech giants such as Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), and Google's parent company Alphabet (GOOGL).

Crypto gains U.S. exposure

The inclusion of a crypto-focused company like Coinbase in such a widely followed benchmark index is a significant development.

It means that millions of everyday investors, as well as numerous model portfolios and index-tracking funds, will now gain exposure to the digital asset sector through their holdings in the S&P 500.

The anticipated impact on trading volume is substantial. "COIN about to be in every portfolio in America," remarked Juan Leon, senior investment strategist at asset manager Bitwise, in a post on X, formerly Twitter.

Leon further projected, "The S&P 500 inclusion is going to force 7x the daily trading volume into [the] stock," as index funds adjust their portfolios to integrate the new constituent.

News of the impending S&P 500 inclusion sparked immediate excitement among investors.

Coinbase shares rose to as high as $225 in post-market trading, an increment of 8.6%, adding to a nearly 4% gain realized during Monday’s regular trading session.

Coinbase's journey and eligibility

This milestone comes just over three years after Coinbase made its public debut on the Nasdaq in April 2021, at which time it had a market capitalization of $52.78 billion.

While its current share price (closing at $207.22 on Monday) is still below the 2021 peak (above $357), the company has increasingly bridged the gap between the crypto world and traditional finance, especially as institutional interest in digital assets has grown.

Eligibility for the S&P 500 is stringent, requiring companies to report a profit in their most recent quarter and demonstrate cumulative profitability over the preceding four quarters.

According to CNBC reports, Coinbase has met all these criteria.

The company recently reported a profit of $65.6 million for its latest quarter. While this is a significant reduction from the $1.18 billion profit reported a year prior, its revenue showed healthy year-over-year growth of approximately 24%, reaching $2.03 billion.

Coinbase's addition to the S&P 500, which already includes a range of technology companies in addition to large-cap tech, follows recent inclusions of other companies in the tech sector, such as Dell Technologies (DELL), Palantir Technologies (PLTR), Super Micro Computer (SMCI), and CrowdStrike (CRWD). This reflects the ongoing evolution of the U.S. economic landscape.