Datadog Surprise Inclusion: Index-driven flows surged following the addition of Datadog (DDOG) to S&P 500, boosting institutional and retail demand and contributing to a 15% share price increase on July 3rd.

Shorts Retreating Datadog: Short interest is down 47% year-to-date, though it has risen 7% since the start of June. The recent uptick may have added fuel to the post-announcement rally as shorts scrambled to reposition into strength.

Robinhood Snubbed: Despite meeting S&P 500 eligibility criteria, HOOD was excluded, triggering a modest selloff on July 3rd. The reaction was muted relative to the upside seen in Datadog but may still reflect disappointment from investors anticipating index inclusion.

Shorts Pressing Robinhood: Short interest has surged 145% YTD and 37% since the start of June, signaling that active managers are increasingly positioning against HOOD.

Squeeze Risk Signal: If Robinhood is added in a future S&P 500 rebalance, a reasonably likely outcome given the improved M&A landscape, short positioning could unwind quickly. Shorts are already sitting on $1.5B in YTD mark-to-market losses and with S3 squeeze risk score at the high end of its YTD range, 67, any inclusion could trigger a sharp reversal, amplified by index flows and forced covering.

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The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks, and merits, as well as the legal, tax, accounting, and investment consequences, of such decisions.

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