Nasdaq re-weighting could hurt Apple’s shares

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    Posted: 05 April 2011 12:28 PM #16

    The weighting of AAPL will go from 20% of the NASDAQ 100 to 12% of the NASDAQ 100. In other words, because AAPL screamed up so high, the NASDAQ 100 had become the NASDAQ AAPL Index.

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    Posted: 05 April 2011 01:18 PM #17

    If the ETF’s, etc. hold $330 billion and the weighting is being reduced 8 percentage points, that translates into a reduction of AAPL holdings to the tune of $26.4 billion, or roughly 77.6 million shares at a $340 price point.  Some have hinted here that the ETF selling has already started. To mirror the index, wouldn’t the MM have to wait until May 2 or does anyone know for sure that this has or is currently happening.  I, for one, would prefer that the unloading of 77.6 million shares occur over the period of time leading up to May 2 versus it happening over a one to two day period.

         
  • Posted: 05 April 2011 01:47 PM #18

    So what happens when what will be the highest market cap company in the land is *finally* added to the Dow 30?

    I’m already anticipating capa’s colorful response.  grin

         
  • Posted: 05 April 2011 02:19 PM #19

    DawnTreader - 05 April 2011 04:47 PM

    So what happens when what will be the highest market cap company in the land is *finally* added to the Dow 30?

    I’m already anticipating capa’s colorful response.  grin

    I’ll censor it in consideration of the old and the young.  But you guys in the middle should use your imagination.

    (What DT refers to is my opinion that it would be bad for AAPL shareholders to be added to the archaic, insipid, useless Dow index.  Fortunately, due to the Dow’s price-weighting, they cannot add AAPL until Steve cooperates with at least a 3-1 split.)

         
  • Posted: 05 April 2011 02:24 PM #20

    capablanca - 05 April 2011 05:19 PM
    DawnTreader - 05 April 2011 04:47 PM

    So what happens when what will be the highest market cap company in the land is *finally* added to the Dow 30?

    I’m already anticipating capa’s colorful response.  grin

    I’ll censor it in consideration of the old and the young.  But you guys in the middle should use your imagination.

    (What DT refers to is my opinion that it would be bad for AAPL shareholders to be added to the archaic, insipid, useless Dow index.  Fortunately, due to the Dow’s price-weighting, they cannot add AAPL until Steve cooperates with at least a 3-1 split.)

    Gosh, that response didn’t take long at all!  LOL

    I’m really not concerned about the short-term or long-term impact of the re-weighting. There a re far bigger issues to impact AAPL’s long-term valuation.

         
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    Posted: 05 April 2011 03:17 PM #21

    madmaxroi - 05 April 2011 04:18 PM

    If the ETF’s, etc. hold $330 billion and the weighting is being reduced 8 percentage points, that translates into a reduction of AAPL holdings to the tune of $26.4 billion, or roughly 77.6 million shares at a $340 price point.

    How can the ETFs hold $330 billion if Apple’s current market cap is less than $315 billion?

    The Nasdaq 100 has not been changed since 1998. Does anyone really imagine that index funds have held the same AAPL shares since then? They just buy and hold except to adjust for money flow in/out?

    This realignment may influence (has already influenced) AAPL in the short term, but it means nothing in the long run.

         
  • Posted: 05 April 2011 04:49 PM #22

    Anyone want to guess how low aapl will go during this re-weighting period.  I’m hoping we don’t go any lower than 326.  I want the re-weighting to get done sooner rather than later.  It is too hard to watch aapl kept down till May 2nd.

         
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    Posted: 05 April 2011 04:58 PM #23

    Drew Bear - 05 April 2011 06:17 PM
    madmaxroi - 05 April 2011 04:18 PM

    If the ETF’s, etc. hold $330 billion and the weighting is being reduced 8 percentage points, that translates into a reduction of AAPL holdings to the tune of $26.4 billion, or roughly 77.6 million shares at a $340 price point.

    How can the ETFs hold $330 billion if Apple’s current market cap is less than $315 billion?

    The Nasdaq 100 has not been changed since 1998. Does anyone really imagine that index funds have held the same AAPL shares since then? They just buy and hold except to adjust for money flow in/out?

    This realignment may influence (has already influenced) AAPL in the short term, but it means nothing in the long run.

    $330B of the top 100 nasdaq stocks of which AAPL is 20% of the weighting

         
  • Posted: 05 April 2011 05:00 PM #24

    With so many aapl shares being sold for the re-weighting, who are all the buyers with the big bucks to buy?  Wouldn’t buyers wait to buy at a lower price now that there’ll be selling pressure till the re-weighting is completed (May 2nd)?

         
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    Posted: 05 April 2011 05:31 PM #25

    pats - 05 April 2011 07:58 PM
    Drew Bear - 05 April 2011 06:17 PM
    madmaxroi - 05 April 2011 04:18 PM

    If the ETF’s, etc. hold $330 billion and the weighting is being reduced 8 percentage points, that translates into a reduction of AAPL holdings to the tune of $26.4 billion, or roughly 77.6 million shares at a $340 price point.

    How can the ETFs hold $330 billion if Apple’s current market cap is less than $315 billion?

    $330B of the top 100 nasdaq stocks of which AAPL is 20% of the weighting

    Yes, but that’s not what madmax assumed in his calculations.

         
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    Posted: 05 April 2011 06:00 PM #26

    alice - 05 April 2011 08:00 PM

    With so many aapl shares being sold for the re-weighting, who are all the buyers with the big bucks to buy?

    Average daily volume is 18 million shares. That’s over $6 billion changing hands every day. Even if all the ETFs and mutual funds decide to dump AAPL on the same day in order to adjust to this re-weighting, it would not be more than the average volume.

    This story is much ado about nothing. It will affect what the index funds buy in future as money flows into them, but that is not what drives the price of individual stocks. Does anyone really believe that INTC & MSFT are all of the sudden going to start appreciating faster than AAPL just because of this?

         
  • Posted: 05 April 2011 06:17 PM #27

    madmaxroi - 05 April 2011 04:18 PM

    If the ETF’s, etc. hold $330 billion and the weighting is being reduced 8 percentage points, that translates into a reduction of AAPL holdings to the tune of $26.4 billion, or roughly 77.6 million shares at a $340 price point.  Some have hinted here that the ETF selling has already started. To mirror the index, wouldn’t the MM have to wait until May 2 or does anyone know for sure that this has or is currently happening.  I, for one, would prefer that the unloading of 77.6 million shares occur over the period of time leading up to May 2 versus it happening over a one to two day period.

    Am I understanding this correctly - 77.6 million aapl shares must be sold to complete the re-weighing process?  TIA

         
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    Posted: 05 April 2011 06:23 PM #28

    Drew Bear - 05 April 2011 08:31 PM
    pats - 05 April 2011 07:58 PM
    Drew Bear - 05 April 2011 06:17 PM
    madmaxroi - 05 April 2011 04:18 PM

    If the ETF’s, etc. hold $330 billion and the weighting is being reduced 8 percentage points, that translates into a reduction of AAPL holdings to the tune of $26.4 billion, or roughly 77.6 million shares at a $340 price point.

    How can the ETFs hold $330 billion if Apple’s current market cap is less than $315 billion?

    $330B of the top 100 nasdaq stocks of which AAPL is 20% of the weighting

    Yes, but that’s not what madmax assumed in his calculations.

    My calc is as follows -  $330 billion multiplied by 20% equals AAPL holdings, or $66 billion.  If the 20% drops to 12%, then AAPL holdings drops to 39.6 billion, or a 26.4 billion reduction.  The 26.4 billion reduction divided by the assumed price per share of 340 results in a reduction of roughly 77 to 78 million shares.  Hope that helps.  That is roughly 5 days worth of trades in one day…yousers!

         
  • Posted: 05 April 2011 06:29 PM #29

    Is this rebalancing executed over the ~30 day period between now and 5/2/11?  Or is it done on one day?

         
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    Posted: 05 April 2011 06:48 PM #30

    madmax & pats: my apologies. I had a mental calculator malfunction.  :-(

    It is still unclear to me how this actually affects AAPL.

    By the time you read this, your chance to make money off the rebalancing of the Nasdaq 100 is long gone. The hedge-fund managers pretty much played that string out within minutes of the news that Nasdaq was altering its benchmark index so that Apple Inc. would play a less dominant role.

    http://www.marketwatch.com/story/apple-and-the-nasdaq-rebalancing-2011-04-05?dist=afterbell