Rivian, Warner Bros. Discovery to Be Added to Nasdaq 100

Norah Mulinda and Jessica Menton, Bloomberg News

A Rivian R1T electric pickup truck during the company's IPO outside the Nasdaq MarketSite in New York, U.S., on Wednesday, Nov. 10, 2021. Electric vehicle-maker Rivian Automotive Inc. priced shares in its initial public offering at $78 apiece to raise about $11.9 billion, the biggest first-time share sale this year. Photographer: Bing Guan/Bloomberg , Bloomberg

(Bloomberg) -- Rivian Automotive Inc. and Warner Bros. Discovery Inc. will be joining the Nasdaq 100 Index as part of its annual rebalancing, which adjusts the tech-heavy benchmark’s composition for changes in market capitalization.

CoStar Group Inc., GlobalFoundries Inc., Baker Hughes Co., and Diamondback Energy Inc. will also be added to the index, according to a press release from Nasdaq. VeriSign Inc., Skyworks Solutions Inc., Splunk Inc., Baidu Inc., Match Group Inc., DocuSign Inc. and NetEase Inc. will be removed from the Nasdaq 100.

The changes will effective before the start of trading on Dec. 19.

“The Nasdaq 100 will continued to be dominated by mega tech,” according to Patrick Mohr, global index and microstructure analyst at Instinet, an institutional broker. “This is just a process that the index goes through to clean out the dogs that have underperformed dramatically. If their market cap was really low, they may have been deemed not appropriate for the index anymore and new names were brought in.”

The Nasdaq 100, which currently has 102 members, is comprised of the largest non-financial companies listed on the Nasdaq stock exchange. There is no minimum market capitalization requirement to be eligible for inclusion, but stocks must have an average daily trading volume of at least 200,000 shares, among other criteria, to be listed.

Joining the index can benefit a company by providing increased equity trading liquidity, a lower cost of capital and heightened visibility from investors. Many large index funds, like the $154 billion Invesco QQQ Trust Series 1 exchange-traded fund, track the Nasdaq 100 and must own all of its members’ shares. And actively managed funds that are benchmarked against it have to buy the stocks as well.

The Nasdaq 100 is down 29% this year as growth companies have taken a heavy beating in the stock market rout. By comparison, the S&P 500 Index has lost 17%, while the Dow Jones Industrial Average has declined 8%.