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Two legendary names of Canadian business that have seen better days – Bombardier Inc. and BlackBerry Ltd. – have fallen out of the country’s blue-chip stock index.

S&P Dow Jones Indices said late Friday it will remove the two from the S&P/TSX 60 later this month. They will be replaced by Algonquin Power & Utilities Corp. and Canadian Apartment Properties REIT, known as CAPREIT.

The index manager also removed Bombardier from the S&P/TSX Composite Index, the broadest measure of the Canadian market. All told, S&P Dow Jones Indices added seven companies and removed 14 from the S&P/TSX Composite in Friday’s announcement.

With the growth of index funds and other passive investing strategies, whether a stock is part of a major index can have a meaningful effect on share prices. Fund managers who track an index need to hold shares in the companies. Canadian stocks added to the composite, which has about 230 to 240 members, depending on the quarter, can see a price bump before and even after inclusion. Similarly, companies removed from the index lose a source of demand for their shares.

Bombardier’s shares have plummeted and are struggling to remain above $1, having fallen roughly 75 per cent this year. It is hemorrhaging cash amid a decline in demand for business jets, which will be its last remaining business if it successfully sells its transportation division to Alstom SA in 2021, as planned. The sale is designed to shore up the company’s debt-heavy balance sheet. The company’s market capitalization is about $1.2-billion today.

Bombardier spokeswoman Jessica McDonald said the company believes index-tracking funds are “a small percentage” of the holders of the company’s TSX-listed Class B shares, and the exclusion “reflect[s] our share price and market capitalization, which are currently impacted by the COVID-19 pandemic as we also work to complete our transformation and divestitures. The TSX’s action doesn’t change either our near-term priorities or long-term goals.”

BlackBerry – which could not be reached for comment late Friday – has seen its stock price fall about 20 per cent this year. BlackBerry was Canada’s most valuable company in October, 2007, with a market value of roughly $85-billion; its market capitalization is less than $4-billion today.

Bombardier and BlackBerry have now become smaller, by market value, than many other Canadian companies that aren’t in the S&P/TSX 60. Dow Jones Indices uses “float” – the value of shares that aren’t held by insiders and therefore trade frequently and are easily available to the public – to judge whether a company should be included in its indexes.

Algonquin shares are up around 50 per cent year-to-date, but CAPREIT is down about 10 per cent.

Other companies to be removed from the Composite are: Ag Growth International Inc.; Alaris Royalty Corp.; Baytex Energy Corp.; Chemtrade Logistics Income Fund; Chorus Aviation Inc; Enerflex Ltd.; Extendicare Inc.; Freehold Royalties Ltd.; Frontera Energy Corp.; HEXO Corp.; MTY Food Group Inc.; Secure Energy Services Inc. and Shawcor Ltd.

New additions to the S&P/TSX Composite are Aurinia Pharmaceuticals Inc.; Dundee Precious Metals; Equinox Gold Corp.; Lundin Gold Inc.; SilverCrest Metals Inc.; Teranga Gold Corporation and WPT Industrial REIT.

The changes take effect June 22.

This was the first rebalancing of the indexes this year. In the midst of the COVID-19 pandemic in March, S&P Dow Jones Indices said it would skip the first-quarter process and wait until June to make broad changes.

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Follow David Milstead on Twitter: @davidmilsteadOpens in a new window

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