S&P Dow Jones Indices said late Friday that it will drop SNC-Lavalin Group Inc. from the S&P/TSX 60 Index of Canada’s largest companies to make room for Brookfield Asset Management Inc.’s new company.
Brookfield (BAM-T) will spin off its asset-management business to shareholders, with trading expected to begin Dec. 12. The spinoff will take the ticker BAM and be called Brookfield Asset Management, while the original company will change its name to Brookfield Corp. and trade under the ticker symbol BN.
The S&P/TSX 60 Index will have 61 constituents on Dec. 12 until the market close, S&P Dow Jones Indices said. Then they will remove SNC-Lavalin (SNC-T), the smallest current member of the index, prior to the open of trading on Dec. 13.
The move takes place at the same time as the quarterly announcement of changes to the S&P/TSX Composite Index, the broadest measure of the Canadian market.
All told, S&P Dow Jones Indices says it will add three companies and remove three from the index.
Added: Africa Oil Corp. (AOI-T), pet-products maker Pet Valu Holdings Ltd. (PET-T) and storage-unit owner Storagevault Canada Inc. (SVI-T).
Dropped: Brokerage and investment-banking company Canaccord Genuity Group Inc. (CF-T), broadcaster Corus Entertainment Inc. (CJR-B-T) and truck maker NFI Group Inc. (NFI-T).
The Composite changes take effect prior to the open of trading on Dec. 19.
S&P 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.
The Index provider does not release its proprietary float calculations. However, data from S&P Global Market Intelligence, a related company, shows SNC-Lavalin with a float-adjusted capitalization of about $4.3-billion, ranking roughly 100th among the Composite companies.
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 250 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.
Research by Morningstar Direct for The Globe and Mail found that Canadian mutual funds and exchange-traded funds, with assets under management totalling $234-billion, had returns that were 95 per cent or more correlated with the S&P/TSX Composite over the 12 months ended June 30, 2021. This included funds that explicitly say they track the index.