S&P Dow Jones Indices announced late Friday that it is deleting once-highflying parka maker Canada Goose Holdings Ltd. (GOOS-T) from the S&P/TSX Composite Index, the broadest measure of the Canadian market.
S&P said it will also delete Ballard Power Systems Inc. (BLDP-T), Africa Oil Corp. (AOI-T), forestry company Canfor Corp. (CFP-T) and coal-storage company Westshore Terminals Investment Corp. (WTE-T).
It will add Bird Construction Inc. (BDT-T) and Triple Flag Precious Metals Corp. (TFPM-T).
The changes will be effective at the open of markets on Sept. 23.
No changes are being made to the S&P/TSX 60, a selection of most of the largest companies in the composite.
Toronto-based Canada Goose, which has a $1.4-billion market capitalization, listed on both the Toronto and New York stock exchanges when it went public in 2017. Chief executive officer Dani Reiss built the brand around a “Made in Canada” mantra, with marketing campaigns based on preserving the country’s polar bears and sponsorships that outfitted Canadian mountain climbers.
However, the majority of trading in the company’s shares now takes place on the NYSE. S&P Dow Jones uses “float” – the value of shares that aren’t held by insiders and that therefore trade frequently and are easily available to the public – to judge whether a company should be included in its indexes. The index provider does not release its proprietary float calculations, but only about half the company’s market capitalization is part of its float, according to S&P Global Market Intelligence, a separate arm of the company.
To get into the composite, a company’s float-adjusted market capitalization must be 0.04 per cent, or four-hundredths of a percentage point, of the total value of the index. To stay in the composite, a company’s float must not drop below 0.025 per cent, or 2.5 hundredths of a percentage point, of the total value of the index.
The changes largely track predictions made by analyst Jean-Michel Gauthier of Scotia Capital Inc. Mr. Gauthier also thought S&P might choose to drop Algonquin Power & Utilities Corp. from the S&P/TSX 60 index, a selection of most of the largest companies in the composite. That did not occur Friday.
With the growth of index funds and other passive investing strategies, whether a stock is part of a major index can have a substantial effect on share prices. Fund managers who track an index need to hold shares in the underlying companies. Canadian stocks added to the composite – which has about 220 to 250 members, depending on the quarter – can see price bumps before and after inclusion. Similarly, companies removed from the index lose a source of demand for their shares.
Research by Morningstar Direct for The Globe and Mail found Canadian mutual funds and exchange-traded funds with assets under management amounting to $395-billion had returns that were 95 per cent or more correlated with the S&P/TSX Composite over the 12 months ended Dec. 31, 2023. This included funds that explicitly say they track the index.
Earlier this year, analysts at ATB Securities Inc., who track the additions and deletions, estimated index-related demand accounts for an average of 5.5 per cent of the float of an S&P/TSX Composite member company.
With files from Andrew Willis