Cybersecurity firm Okta (OKTA) is being added to the benchmark S&P 500 index.
S&P Dow Jones Indices announced on Oct. 30 that Okta will replace Kenvue (KVUE), the maker of Tylenol and Band-Aid products, in the index on Nov. 4.
Kimberly-Clark (KMB), which is already in the S&P 500, is acquiring Kenvue in a deal that’s expected to close with weeks.
When an acquisition removes a stock from the S&P 500, the index needs to fill the vacancy by adding a new stock, in this case Okta.
Stocks are chosen for inclusion based on factors such as company size, profitability, and how actively their shares trade.
Okta, whose software helps companies manage passwords, is moving up from the S&P MidCap 400 index where it currently trades.
Inclusion in the S&P 500 is positive for individual stocks as it requires mutual funds and exchange-traded funds (ETFs) that track the index’s performance to buy the shares.
When a company such as Okta joins the S&P 500, various funds need to buy its shares to match the overall index and its weighting.
OKTA stock jumped 3% on news of its addition to the S&P 500. The shares are up 129% over the past 12 months and currently trading at $208.24 U.S. per share.
