What happened

Shares of the financial services company B. Riley Financial (RILY -3.05%) traded more than 14% higher in the late morning on Tuesday after it announced that it will join the S&P SmallCap 600 on Thursday.

So what

B. Riley offers a variety of financial services, including capital markets and investment banking, advisory services, real estate, wealth management, venture capital, and more.

The S&P SmallCap 600 is an index of U.S. small-cap stocks with market capitalizations ranging from $700 million to $3.2 billion at the time the company is added to the index. B. Riley currently has a market cap of nearly $1.9 billion.

Line with arrow trending upward.

Image source: Getty Images.

Stocks typically see a nice boost when they join a new index because funds that essentially mimic that index must now buy the stock. Also, being added to an index results in greater visibility for the stock.

Now what

In late March, B. Riley released guidance for its first-quarter earnings. The company said it expects operating adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to range from $105 million to $115 million, up from adjusted EBITDA of $70.9 million in the first quarter of 2020.

The uptick in earnings makes sense, as many of the areas that B. Riley operates in, such as investment banking and capital markets, have seen a ton of activity during the pandemic.

The company looks well positioned, although it will be important to watch how activity in its different business segments shapes up throughout the year because areas like investment banking and capital markets could normalize.