|
Tech upstarts get the boot
|
 |
June 1, 2000: 8:56 a.m. ET
What goes in must come out, as London's FTSE 100 approaches reshuffle
|
LONDON (CNNfn) - Just three months after its biggest-ever shake-up, London's benchmark FTSE 100 index is set for another major transformation, with a handful of technology upstarts likely to be ejected from the index, reflecting the woes of the "new economy".
The quarterly reshuffle of the 100 shares that make up Europe's most watched stock index is due on June 7. Barring a huge rally, many of the companies that vaulted into the index in March will be booted out. 
Under the rules set down by FTSE International, the manager of London's benchmark share indexes, any companies ranking higher than 90th in the list of the largest stocks by market capitalization is added to the FTSE 100 index at the quarterly review, while companies that have fallen to below 110th spot are automatically removed.
In the quarterly reorganization in March, nine companies joined the FTSE at one go, more than at any previous time in the index's 18-year history. The revision was notable for the en-masse addition of "new economy" shares and the seeming demise of old-fashioned "smokestack" industries. Brewers Bass (BASS) and Whitbread (WTB), despite their centuries of history, were relegated to the London market's second tier, while newcomers such as Internet security firm Baltimore Technologies (BLM) and telecom network operator Thus (THUS) were catapulted into the front rank of British corporate life.
 But life in the fast lane has proved a dizzying experience for shares of many of the new boys. Their arrival in the FTSE coincided with a backlash against such companies' exalted valuations and over-hyped prospects of the "dot.coms".
Since the heady days of early March, shares in Baltimore and Thus have crashed some 70 percent, while handheld-computer maker Psion (PSON) has more than halved in value. Internet access provider Freeserve (FRE) fell by a similar amount until bid speculation drove the stock almost 30 percent higher Tuesday.
Tech hammering raises some cheer
Several companies will be raising a glass to celebrate the demotion of the tech firms, notably some of Britain's largest beer and spirits producers.
Based on the latest market valuations, brewer Scottish & Newcastle (SCTN), relegated from the FTSE 100 in March, is knocking on the door for readmission, now ranking as the second-largest firm outside the benchmark index, with Whitbread not far behind. Spirits producer and distributor Allied Domecq (ALLD), also ejected at the last quarterly shake-up, has already sneaked in the back door, taking the place of Cable & Wireless Communications after that firm was taken over.
Other stocks looking to get back into the big time include yet another beer firm, South African Breweries (SAB), and recent rejects such as building materials firm Hanson (HNS) and Imperial Tobacco (IMT). Proving that there are still signs of life in the technology sector, however, fiber-optic components maker Bookham Technology (BHM) - which listed recently on the London exchange - is a certainty to join the big boys at the next official rejig.
Membership of the FTSE 100 index is a plus for companies because it means their shares are likely to be bought by managers of funds that set out to track the key index. These funds have increased in popularity among U.K. investors thanks to their reduced commissions and dealing costs, and because they eliminate the risk of picking an actively managed fund that falls short of the market's overall performance. Membership of the index also helps companies raise capital, because of their higher visibility. 
|
|
|
|
|
|
FTSE International
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
