Nasdaq re-weighting could hurt Apple’s shares

  • Posted: 05 April 2011 02:16 AM

    From marketwatch.com:
    url:  ttp://www.marketwatch.com/story/story/print?guid=3B467FC2-9CE2-43F5-B3F7-22BD9C7557DB

    April 5, 2011, 12:59 a.m. EDT
    Nasdaq re-weighting could hurt Apple’s shares: WSJ

    HONG KONG (MarketWatch)—Apple Inc. (NASDAQ:AAPL) will see its more than one-fifth weighing in the Nasadaq-100 reduced to about 12% under a rebalancing set to be announced Tuesday and would take effect May 2, a move which could weigh negatively on its share price, according to a report Tuesday in The Wall Street Journal. Cutting the weighting is important because it could foster significant selling of Apple shares from fund mangers who track the index, the report said. Apple was given more than twice the weight in the index than it should have had based on its number of shares, the report said. About $330 billion worth of assets track the Nasdaq-100 via exchange-traded funds, mutual funds, options and futures, the report said. The reweighting will be based on shares outstanding for stock comprising the index of as March 31, it said.

         
  • Posted: 05 April 2011 02:56 AM #1

    Maybe there was some knowledge or suspicion of this forthcoming move in the right circles, which would explain the weakness in the stock during the last couple of weeks.

    Hence, now that they are done sellling the news gets out and the stock goes back up… grin

         
  • Posted: 05 April 2011 05:28 AM #2

    Wish you were right but the sell-off will be huge!

         
  • Posted: 05 April 2011 05:31 AM #3

    Expecting a hit of about 10 points, or 2.7%.

         
  • Posted: 05 April 2011 06:29 AM #4

    From the Naxdaq site:

    “Launched in January 1985, the NASDAQ-100 Index represents the largest non-financial domestic and international securities listed on The NASDAQ Stock Market based on market capitalization. The NASDAQ-100 Index is calculated under a modified capitalization-weighted methodology. The methodology is expected to retain in general the economic attributes of capitalization-weighting while providing enhanced diversification. To accomplish this, NASDAQ will review the composition of the NASDAQ-100 Index on a quarterly basis and adjust the weightings of Index components using a proprietary algorithm, if certain pre-established weight distribution requirements are not met”

    I’m feeling rather angry about this. It doesn’t seem rational that they should shift the index by that amount on a single stock and I’d actually like to know what the lawyers think of this. Apple has not shifted by that much in the last 3 months, so either they were negligent for failing to update the weightings regularly as stated, or something is completely off with this re-weighting event today. Even if they had made mistakes by not rebalancing earlier, you’d think they’d have a plan to gradually rebalance over several quaerters or years.

    Given retail and institutional interest in AAPL, I wonder if the NASDAQ thought this out ahead of time. I will admit to being ignorant of the weighting algorithms—I really did think they were both known and automatically applied on a regular basis. Count me mad as hell.

         
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    Posted: 05 April 2011 06:35 AM #5

    We’re already taking a hit, NASDAQ morons.

    Strange, I’ve heard one reason we don’t want a Dow 30 listing is index stocks are so widely held, there is little room to run. So perhaps de-weighting AAPL will be bad short term but good long term.

    And yes, I’m pissed as well. If there isn’t a cause of action for this, there should be.

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  • Posted: 05 April 2011 06:37 AM #6

    bick - 05 April 2011 08:31 AM

    Expecting a hit of about 10 points, or 2.7%.

    If so, it means the so-called re-weighting of Apple has a bigger impact than Jobs announcing his latest medical leave.

         
  • Posted: 05 April 2011 06:42 AM #7

    JDSoCal - 05 April 2011 09:35 AM

    We’re already taking a hit, NASDAQ morons.

    Strange, I’ve heard one reason we don’t want a Dow 30 listing is index stocks are so widely held, there is little room to run. So perhaps de-weighting AAPL will be bad short term but good long term.

    And yes, I’m pissed as well. If there isn’t a cause of action for this, there should be.

    The fact ‘proprietary’ really means “behind closed doors” is why I think this is a problem.

    If the algorithm was public and automatically applied every 90 days, then nobody would ever be able to legitimately complain when re-weighting occurs.

         
  • Posted: 05 April 2011 07:02 AM #8

    Hope they soon add AAPL to the DJIA

         
  • Posted: 05 April 2011 08:10 AM #9

    It is likely that recents moves downward of AAPL were quietly pre-managed
    by the NAS, the Fed, large holders and Apple.

    I would not be surprised with good news, outstanding Q2 results
    and a lot of positive from the “whory” media and blog apparatus

    AAPL PM is now up 335 from 330

         
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    Posted: 05 April 2011 08:53 AM #10

    Hamourabi - 05 April 2011 11:10 AM

    It is likely that recents moves downward of AAPL were quietly pre-managed
    by the NAS, the Fed, large holders and Apple.

    I would not be surprised with good news, outstanding Q2 results
    and a lot of positive from the “whory” media and blog apparatus

    AAPL PM is now up 335 from 330

    How could the Fed influence the price of AAPL? They do not buy stocks.

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  • Posted: 05 April 2011 08:57 AM #11

    Hamourabi - 05 April 2011 10:02 AM

    Hope they soon add AAPL to the DJIA

    With a share price near $330, AAPL would never be added to DJIA (which is price-weighted), unless there is a substantial stock split in the future.

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    Posted: 05 April 2011 11:09 AM #12

    I had thought that the Nasdaq was automatically weighted upon market cap. 

    So, what the Nasdaq, or somebody, is really saying is that they fell down on the job by letting any old company have too much or too little weight until long after the company’s weight is out of whack.

    Oh, what about Apple ?  In a year, the adjustment would have been even bigger and there would be more egg on somebody’s face.

         
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    Posted: 05 April 2011 11:29 AM #13

    The weighting of the Nasdaq (AKA the Nasdaq Composite) is automatic by market cap. The index being rebalanced is the Nasdaq 100, not the Nasdaq.

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    Posted: 05 April 2011 11:36 AM #14

    thanks for the clarification, A2+

         
  • Posted: 05 April 2011 12:18 PM #15

    Well,  this will certainly not help the stock price of AAPL but I tell you what really gets me spooled up.  Clearly a number of big players KNEW this over the last couple of days and were able to react.  I trade AAPL as well as invest in it and have done very well but this is one of the few times I clearly feel insiders were able to manipulate the information and markets to my detriment. 

    Some one estimated a 10 pt hit because of this,  Hello?  that is just what we have had in the last day and a half trading w/o any other clear reasons being out there.