Small cap 'elephant' SanDisk moved to S&P 500; shares rally
Quotes of chipmaker SanDisk jumped in extended trading yesterday, November 24, and early today, November 25. The rally followed news that the company will leave the S&P SmallCap 600 index on Friday, November 28, to join the S&P 500. SanDisk received an independent listing only in February. Since then, its shares have risen more than 500%, with its market capitalization approaching $33.3 billion. This is why investment bank Stephens calls it an “elephant” in the small-cap index.
Details
Shares of SanDisk Corporation, a maker of chips and flash drives, were up as much as 9% in extended trading at one point, before the gains eased to about 3% as of this writing.
The chipmaker will leave the S&P SmallCap 600 and join the S&P 500 starting Friday, S&P Dow Jones Indexes said after the close of the regular session yesterday. SanDisk will replace Interpublic Group, a marketing company, in the S&P 500. (Interpublic is being acquired by Omnicom Group, and the deal is nearing completion.)
Stocks typically rise following inclusion in major indexes, CNBC notes, as funds tracking these benchmarks need to mirror changes in their portfolios.
This morning's rally extended yesterday's increase, which came to 13.3% to almost $227 per share. The move followed Morgan Stanley analyst Joseph Moore’s decision to raise his target price on SanDisk by almost 4% to $273 per share, while maintaining an "overweight" rating.
About SanDisk
SanDisk went public only in February, after being spun off from hard disk drive maker Western Digital. Since then, its share price has soared 547%, lifting the company’s market valuation to about $33.3 billion. According to MarketWatch data, this is roughly three times the biggest components of the S&P SmallCap 600.
Because of that, Stephens analyst Melissa Roberts called SanDisk an “elephant” in the S&P 600. Its disproportionate size gave it a 2.6% market cap weighting in the index, MarketWatch writes. The rapid growth of SanDisk’s shares made it a candidate for S&P 500 inclusion – and a higher priority than Strategy, the largest corporate holder of bitcoin, Roberts points out.
Other S&P SmallCap 600 changes
PTC Therapeutics, a biotech with a market capitalization of $6.4 billion, will replace SanDisk in the S&P SmallCap 600. On this news, the shares jumped 6.5% in early trading today.
Upwork ($2.46 billion market cap), owner of the online job platform Upwork, will replace healthcare consulting firm Premier in the S&P SmallCap 600. Upwork shares were up 3.7% this morning.
First Interstate BancSystem ($3.3 billion market cap) will join the index effective December 2, replacing apparel maker Hanesbrands.
