Apple to lose weighting in Russell index, shares could fall

Mon Jun 20, 2016 9:02am EDT
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By Rodrigo Campos

NEW YORK (Reuters) - After dropping more than $200 billion in market capitalization in one year, Apple shares could fall further as they are set to lose their weighting and be reclassified in the annual reconstitution of the widely followed Russell indexes.

When all is said and done, about $1.3 billion more will be sold in Apple Inc shares at the market close on Friday, when the reconstitution of the Russell indexes takes effect, according to an analysis by Credit Suisse. (Graphic: here)

Because Apple has been aggressively buying back and retiring its stock, outstanding shares have dropped to less than 5.5 billion from 5.8 billion in late June 2015, when the Russell indexes were last recalibrated, according to Reuters data.

Apple's weighting in the Russell 1000 will roughly fall to 2.52 percent from 2.77 percent, Credit Suisse said. The decline is due to the combination of fewer shares outstanding and Apple's smaller part of the index's capitalization.

The performance of a market-weighted index is more influenced by larger companies, like Apple.

With the changes, fund managers who are pegged to the index, including exchange-traded funds, will have to sell the stock to match the new, lower weighting.

Roughly $96 billion in U.S. fund assets are benchmarked directly to the Russell 1000, according to a Reuters analysis of Morningstar Inc data. That compares to $2.2 trillion pegged globally to the S&P 500, according to S&P Dow Jones Indices.

Adding to the selling pressure, Apple will be classified as both a value and a growth company at Russell. After the close on Friday, 92 percent of Apple will be considered "growth" and 8 percent "value" according to index provider FTSE Russell, splitting it between two Russell subindexes.   Continued...

The Apple logo is pictured behind the clock at Grand Central Terminal in the Manhattan borough of New York, February 21, 2016.   REUTERS/Carlo Allegri