Index compiler FTSE Russell has confirmed that Edinburgh investment giant Abrdn is facing demotion from the FTSE 100 following a drop in its share price of more than 30% in the past month.
Abrdn rejoined the index in December 2022.
Falling out of the FTSE 100 index can dampen demand for a company’s shares due to the huge role played in stock markets by giant funds that simply track the performance of the index.
Abrdn shares have fallen to around £1.60 to reduce the firm’s stock market value to just over £3 billion.
“FTSE Russell, the global index provider, advises of the following indicative changes to the FTSE 100 and 250, based on data as at Friday 18th August 2023 …” said the index compiler as it listed Abrdn, Johnson Matthey, Persimmon and RS Group as “Indicative FTSE 100 Deletions.”
Listed as “Indicative FTSE 100 Additions” are Dechra Pharmaceuticals, Diploma, Hikma Pharmaceuticals and Marks & Spencer Group.
FTSE Russell added: “The actual review of the FTSE UK Index Series will be conducted using data as at market close on Tuesday 29 August 2023.
“Confirmed rebalance changes will be announced after market close on Wednesday 30 August 2023.”
On August 8, Abrdn said its assets under management and administration slipped 1% to £496 billion in the first half of 2023 as it reported net outflows “excluding liquidity” of £4.4 billion.
Abrdn said positive flows of £1.9 billion at its Interactive Investor (ii) business were “offset by outflows” in its investments unit and adviser business.
Abrdn shares fell as much as 11% on August 8 alone.
Susannah Streeter, head of money and markets, Hargreaves Lansdown, said: “The competition for promotion to the FTSE 100 is on, with plenty of contenders jostling for a position in the topflight.
“The reshuffle of the index is based on companies’ total market capitalization at the end of Tuesday 29 August, with notification of changes after UK markets close on the 30 August, so there is still significant time for estimations to change.
“Rebalancing also depends on the free float factor – how many shares are readily available to be publicly traded in the stock market.
“There are also strict rules to stop a hokey-cokey scenario emerging, with the same handful of companies falling in and out every quarter.
“So, a company has to be in the top 90 by market cap to jump into the big league or to be demoted it has to be below the 110th largest companies by size.
“Even so Abrdn is set for an awkward dance back out of the index, after only rejoining in December, after being relegated this time last year.
“A place in the ‘blue chip’ index is considered important for the prestige it bestows on a company but also because it can affect how much money flows into certain shares.
“A passive fund which tracks for FTSE 100 won’t invest in a company that is relegated into the FTSE 250 so this can affect individual stock performance …
“Abrdn faces the prospect of being ditched from the topflight for the second time in a year, after its share price dropped my almost a third in less than a month.
“It reported fund outflows of £4.4 billion for the first half of 2023 amid challenging economic conditions.
“Certainly, sky-high inflation and worries about economic growth have been challenging for the asset management sector, and Abrdn’s weaker performance in this environment looks set to propel it out of the big league.
“The company has shrugged off the potential demotion, remaining confident in its strategy. It has been trying to keep revenue moving in the right direction through acquisitions.
“It now owns Interactive Investor, which should provide a relatively stable source of assets for the group given its one of the UK’s biggest direct-to-consumer investment platforms.”