SAN FRANCISCO -- Facebook shares rose Thursday on news that the giant social network will be added to the Standard & Poor’s 500 index next week.
S&P Dow Jones Indices made the announcement Wednesday that Facebook will replace Teradyne Inc. on the index after the market closes on Dec. 20.
Facebook will also join the S&P 100 index, replacing Williams Cos., cementing its rise as one of the nation’s most powerful tech companies.
When a stock is added to a major index, its shares usually rise, because investment funds that track the index must buy shares.
Min Moon of J.P. Morgan’s Quantitative & Derivatives Strategy estimated that investors would need to purchase 192.7 million shares of Facebook in conjunction with the stock added to both indexes.
Facebook shares rose nearly 5% to $51.71 in midsession trading, closing in on the 52-week high of $54.83 reached in October. Shares have risen more than 85% from a year ago.
"We're pleased to be included in the S&P," said a Facebook spokesman.
Facebook has been a front-runner for the index since it reported its fourth straight profitable quarter in October, a key criteria to be eligible for the S&P 500. Analysts have been speculating for months when Facebook would be tapped by the index.
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