How many stocks are in the Standard and Poor's 500 (S&P 500) index? It’s not as easy as you think! While most people would assume that the correct answer is 500, that is wrong. There are actually more than 500 stocks in the index… and the current number will increase even more later this year.
Why Are There More than 500 Stocks in the S&P 500?
Technically, the S&P 500 is an index of the stocks of 500 large companies on the New York Stock Exchange (NYSE) and NASDAQ Stock Market, weighted by market capitalization. So how can there be more than 500 stocks in the index when only 500 companies are included?
Companies listed in the index may have issued multiple types of common stock. The S&P 500 index has decided to include more than one type of common stock for some companies listed in the index. However, not all forms of common stock for every company are included. Instead, the S&P 500 picks and chooses which companies will have more than one class of common stock included.
How Many Stocks Are Currently in the S&P 500?
Currently, there are 502 stocks in the S&P 500. The two companies that have more than one form of common stock in the index are Discover Financial, which has stock tickers DFS and DISCA included, and Google, which has stock tickers GOOG and GOOGL included.
However, there are plans to add multiple forms of common stock for three additional companies in September 2015. These companies include Comcast, which will have stock tickers CMCSA and CMCSK listed; 21st Century Fox, which will have stock tickers FOX and FOXA listed; and News Corp., which will have stock tickers NWS and NWSA listed. This will bring the number of stocks in the S&P 500 to 505 later this year.
Why Do Some Companies Have More than One Type of Common Stock?
Companies often have more than one type of common stock when those who control the company wish to raise money while still keeping control of the company. One way to do this is by offering different shareholder rights for each different class of stock.
For instance, a company may issue 100 A shares that offer ten votes per share of common stock and at the same time issue 750 B shares that only get one vote per share of common stock. If those in leadership of the company own all of the A shares, they would have 1,000 votes and could easily overrule any proposals from those with B shares, who would only have 750 votes.
While this example is basic, multiple forms of stock can get complicated very fast and differ from company to company.
Will the Number of Stocks in the S&P 500 Continue to Grow?
Potential exists for the number of stocks in the S&P 500 index to continue growing in the future. Thirteen companies currently have two or more classes of common stock while there are only five companies that the S&P 500 will include in 2015. This will allow for the potential of even more stocks entering the S&P 500 in the future.
However, the decisions appear to be made on a case-by-case basis in order to represent what is truly occurring in the stock market from day to day. Different classes of stocks may trade at different prices or follow different trading patterns, which may be why some companies have multiple classes of stock included while others do not.
As companies grow or shrink, the S&P 500 may reorganize to include a different 500 companies and return to including only 500 stocks once again. But until it does, but your friends they don’t know how many stocks are in the S&P 500 and you’re bound to win (unless your friends read MoneyTips)!