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S&P Canadian Index changes announced


Granitepost
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One effect of FFH's proposal to buy the remining ORH shares and the issue of more FFH shares recently is that the S&P plans to increase the relative weight of FFH in the S&P/TSX Composite and Capped Composite, theS&P/TSX Completion and Equity Completion, the S&P/TSX Equity andCapped Equity and the S&P/TSX Capped Financials indices to reflect the issuance of new shares as part of the transaction, which will be effective after the close of trading on Monday, September 14, 2009.

 

Although I do not know the extent of the increase, I would presume that this change will create an increased demand for FFH shares, probably immediately, for those who are tracking the Composite with their portfolio.

 

Considering that a large percentage of the new FFH shares have been placed directly by FFH with a small group of institutions, there may not be a large number of shares available to satisfy the increased demand caused by this change.

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FFH seems to have closed the day at $394.49 up $23.49 in Toronto on a volume of 213,319 shares and $364.58 in the US up $20.70 on a volume of 237,463 shares.  The total volume on both exchanges is about 450,000 shares.

 

If I remember correctly, the recent share issue by FFH was in the amount of 2,881,844 shares with most of them going to 11 institutional investors.  Today's volume would be equal to a large chunk of the part of the new share issue sold to retail investors so the liquidity of FFH may not be much better now than it was before the share issue if the bulk of today's volume is going to be used for index funds reacting to the Index changes.

 

Does anyone have a handle on the number of shares that would have been needed due to the index changes?  Maybe I am off base in this line of thinking, but it seems logical to me.

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