FTSE 350 Quarterly reshuffle: Pershing Square bounces back

FTSE 350 Quarterly reshuffle: Pershing Square bounces back

FTSE Russell, the global index provider, announced its latest quarterly review on 2 December 2020, which saw one change to the FTSE 100, and three changes to the FTSE 250.

Home repair group Homeserve’s time amongst the FTSE 100 was short lived after it found itself relegated to the FTSE 250 in the latest quarterly reshuffle, following a six-month stint among the top 100 companies after joining the FTSE 100 in the June reshuffle. The news comes despite a strong year, with the company reporting a 17% increase in revenue against the same period in 2019 in its six-month interim results just last month.  Reflecting this strong performance and ‘continued confidence in the Group's growth prospect’, Homeserve also increased its dividend by 7% to 6.2 pence.

Taking its spot in the FTSE 100 is investment vehicle, Pershing Square Holdings.  Hedge fund manager Bill Ackman’s company had been loss making for 4 years between 2015-2018 after a number of bad bets, most notably its 5 year war with Herbalife, which the company had taken a short position in and branded as a pyramid scheme that was destined to fail. The company has recently bounced back, reporting a 58.1% gain in 2019, and a 62.8% gain at the end of November 2020.  The company had also noted in its semi-annual report, that being the 100th largest company by market cap on the LSE as of June 2020, it only required an increase of 16.6% to its public market cap in order to displace the 90th ranked company, and secure its place in the FTSE 100. The company had set out to increase the probability for inclusion, including converting management shares to public shares (as management shares are not included in the calculations for inclusion), and stating that inclusion in the FTSE 100  ‘would be a material positive catalyst in increasing demand for PSH shares’. Pershing ultimately achieved its goal for inclusion, and joins the FTSE 100 on 18 December, when the reshuffle is expected to come into effect.

Elementis found its way back into the FTSE 250, after previously dropping out in the June reshuffle. The chemicals company is currently battling off a possible takeover from US company Mineral Technologies, who approached the company with a possible all-cash offer, valuing Elementis at approximately £622m. The board of Elementis rejected this proposal, stating it significantly undervalued the company.  Mineral Technologies increased the offer by 9% to 117 pence per share, however, Elementis maintained that this still undervalued the company. The company’s shares have been on the rise since the possible offer was announced on 12 November, increasing 22% between 11 November and 1 December, and closing at 119 pence per share prior to the reshuffle announcement. Mineral Technologies has until 10 December to confirm whether it will be making a firm offer for the soon to be reinstated FTSE 250 company.

Real estate company Hammerson will be joining Elementis in the FTSE 250, after also having previously dropped out in the September reshuffle. On 1 September 2020, a day before the results of last quarters reshuffle, Hammerson saw its share price rocket to pre-pandemic levels after the company launched a rescue plan to increase liquidity and reduce debt, including a £552m rights issue and the £274m sale of its stake in VIA Outlets joint venture.

Contrastingly, marine engineers, James Fisher & Sons will be exiting the FTSE 250. The long-time FTSE 250 constituent’s shares have been on a downward slope since the onset of the pandemic and had taken a further dive following the company’s trading update in November.  The company noted that it did not experience its expected improvement to trading conditions or the seasonal uplift. This resulted in a 17% decrease in revenue for the 9 months ended 30 September 2020, compared to the same period last year. Since the announcement, shares in the company have been trading at less than half their value in February 2020, before the onset of the pandemic.

Alongside the latest movements, the FTSE Russell announced that it will no longer be utilising a reserve list for the FTSE 100 and FTSE 250 to select replacement companies for intra-quarter deletions. Replacements will instead be selected by ranking the existing constituents of the FTSE All-Share index - with the highest-ranking company not included within the applicable index serving as the replacement.

All changes will be implemented at close of business Friday 18 December 2020 and will come into effect from start of trading on Monday 21 December 2020.

FTSE 100 entrantsFTSE 100 exits
Pershing Square HoldingsHomeserve
FTSE 250 entrantsFTSE 250 exits
ElementisFisher (James) & Sons
HammersonPershing Square Holdings (promoted to FTSE 100)
Homeserve (down from FTSE 100)Scottish Investment Trust

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