What happened
Live by the index, die by the index -- being included in a well-known collection of stocks can really help a company's visibility and boost investor morale. The opposite effect can kick in if it gets kicked out of an index.
Unfortunately for shareholders of Coherus BioSciences(NASDAQ: CHRS), that's what happened to their company after market hours last Friday. Following that, its stock price was falling by 10% week to date as of early Friday morning, according to data compiled by S&P Global Market Intelligence.
So what
Late that day, S&P Dow Jones Indices -- operator of the high-profile indexes that bear the S&P name -- effected its typical quarterly rebalance of several indexes. These changes will involve the S&P SmallCap 600 index, the group of stocks that formerly included Coherus.
The biotech was one of 10 stocks that are to be deleted from the S&P SmallCap 600 to make room for S&P MidCap 400 titles moving into the former index. Among these incoming S&P SmallCap 600 constituents are pizza slinger Papa John's International, storied athletic apparel retailer Foot Locker, and JetBlue Airways.
The changes, which also affect the bellwether large-capS&P 500 index, will take effect before market open on Monday, Sept. 18.
Now what
While the "index effect" often occurs with stock inclusion or deletion from a popular index, it tends to be short-lived. After all, being listed barely impacts a company's fundamentals, if at all. But getting the boot means that a stock can fall off the radar of the many index funds that comb such collections for investment opportunities. Coherus will hardly benefit from being less visible.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Foot Locker. The Motley Fool has a disclosure policy.
