The make-up of Canadian Pacific Railway Ltd.’s board isn’t the only thing getting changed after activist investor Bill Ackman and his slate of directors were voted in on Thursday. As of next week, CP’s weighting in the S&P/TSX Composite Index will also get shuffled.
As of May 24, CP's weighting in the Composite Index will drop from 95 basis points to 82 basis points, and down to 1.12 per cent in the S&P/TSX 60 from 1.3 per cent, according to ITG Canada.
The reason: because Bill Ackman is now on the board of directors, S&P considers his approximately 14 per cent stake to be a control block. In other words, his position isn’t part of the free float, which has fallen to 146 million shares.
Although the move makes sense, ITG noted that it was rare to see the S&P act so quickly. Typically these types of determinations are made once a year during the annual rebalancing in September.