On Friday at market close, Uber (NYSE: UBER) rumors of joining the S&P 500 were confirmed and should officially occur on Monday, Dec 18, 2023. Uber IPO'd over four years ago at around $42/share. Since then, Uber has struggled with state laws, paying drivers a competitive wage and becoming profitable.
It wasn't until the second quarter of 2023 that Uber became profitable. Uber could be attributed to the company cutting more than 3500 jobs, the delivery business increasing profitability ahead of schedule, and fixing some issues within the company's cost structure. As a result, Uber has finally met the criteria to become a member of the S&P 500.
There is a lot of time between the official announcement and the induction date. Typically, when a stock is announced to join an index, it will rally as hedge fund managers start to acquire shares of the company. Does this mean you should rush to add it to your portfolio? That solely depends on your risk tolerance as an investor.
Although Uber has become reliable enough as a company to be added to the S&P 500, it's still a risky add. They are constantly battling with certain states over how they classify their drivers as independent contractors instead of employees. The drivers threaten to boycott every other day, not to mention that Uber does not pay dividends. So, if you decide to add Uber to your portfolio, keep all risks in mind and expect it to potentially dip once it is officially added to the S&P 500 on the 18th of this month.