Tomorrow, Thursday, September 9, the Scientific Council for Indices is meeting at Euronext. A meeting which takes place 4 times a year and which aims to adjust the composition of the various stock market indices. With a back-to-school meeting in September which often rhymes with more structural changes.
What to expect from this meeting? Will it come to modify the 40 stocks that make up the index and if so, to the detriment and to the benefit of which companies? It is to these questions that we will try to clarify.
What criteria to enter the CAC 40?
Before going into detail, it is important to recall the methodology and criteria used to integrate the CAC 40. Euronext takes into account two parameters: the volumes traded of the asset as well as the company’s free float capitalization.
- The volumes traded : the volumes exchanged are treated as an annual average. To determine this value, the Scientific Advisory Board takes into account the exchanges traded in the Euronext order book as well as off-market transactions provided they have been carried out in the Euronext environment.
- Floating capitalization : with free float capitalization, it is a question of withdrawing from the total capitalization of a company, that which is held by a certain category of shareholders such as founders, managers or even the State. The aim here is to keep only the part of the capitalization deemed to be negotiable and active on the markets. For this second parameter, Euronext uses a rounding to 5%.
Good to know : In addition to these two criteria, a third is added: the share turnover rate adjusted by free float capitalization. This must then be at least 20%.
It is therefore according to these parameters that the CAC 40 stocks are classified. The 40 most important stocks then enter the index, while the next 20 are ranked in the CAC Next 20 which includes companies classified between 41 and 60. Please note that in order to act on the modifications, the Scientific Index Council will take into account the data available on the last stock market day of the previous month. In this case here, August 31.
What to expect from the September Update?
Tomorrow, the scientific index council will meet to decide on a possible modification of the 40 stocks that make up the CAC index. Certain values remain in the spotlight. If we stick to free float capitalization, 4 CAC 40 companies are now showing beyond the fortieth place. It is :
- Thales: 41st
- Bouygues: 46th
- Renault: 53rd
- Atos: 60th
Conversely, this allows 4 companies in the CAC Next 20 to display a free-float capitalization among the 40 most successful. These are the companies Eurofins (33rd), Sartorius Stedim Biotech (36th), Edenred (37th) and Euronext (39th).
If we stick to the trade volumes, Thalès again appears in difficulty with a forty-sixth position. The weighting of the two variables would thus place the company in forty-first place and therefore outside the CAC 40. For its part, Atos would appear in forty-fourth place overall. They are therefore the two companies most threatened by the restructuring of the index. If one of these two companies were to leave the CAC, Eurofins, which has the thirty-seventh position on the basis of the two criteria, would act as the favorite to integrate the index.
Nevertheless, despite the clarity of the criteria selected, Euronext contractually reserves the right not to ratify changes which would be justified from the point of view of these criteria. By highlighting in particular the principle of “sectoral representativeness” so as not to oust a company. Other elements like the seniority bonus are also variables to consider. This could play positively for Thales and / or Atos.
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