Why is S&P 500 inclusion Positive for Facebook?

Inclusion into an index is always a positive signal for a stock. The biggest reason is that so many institutions invest into index trackers/ETFs. These ETFs have to buy the underlying stocks in order to track the index. There are billions of dollars invested into ETFs tracking a famous index like S&P 500. As soon as FB is included, these ETFs have to sell the stock that was taking out of the index and replace that position with a position in Facebook. Clearly, demand pushes the included stock (FB) price up. This is the reason why we saw Facebook move 4% higher on the news of listing into S&P 500. Do remember that nothing changed fundamentally in the challenges and operations of the business and stock should be analyzed focusing on the business.