CanWest teeters on edge of index by David Parkinson
Source : Globe & Mail
September 5, 2008
The struggling stock of CanWest Global Communications Corp. is poised to suffer another blow - deletion from Canada's benchmark stock index.
With index provider Standard & Poor's due to announce its quarterly revisions to the S&P/TSX composite index in the next week or so, CanWest's market capitalization as of the end of August appears below the criterion for continued inclusion in the index, according to UBS Securities Canada Inc. strategist Garry Cooper. If his calculations hold true, CanWest would disappear from the closely watched index as of the end of trading on Sept. 19.
Exclusion from the key index would be another dose of bad news for the stock, which has slumped 63 per cent so far this year, as the company struggles with a weakening outlook for advertising sales and its onerous $3.7-billion debt load. That's because many fund managers, particularly outside of Canada, are barred by the terms of their funds from holding stocks that aren't members of major stock indexes such as the S&P/TSX composite.
CanWest's common shares slid 5.6 per cent on the Toronto Stock Exchange yesterday, as word of Mr. Cooper's analysis filtered through the market.
Under S&P's methodology for the S&P/TSX composite, component stocks must maintain a "float-adjusted" market capitalization of at least 0.025 per cent of the index's total capitalization in order to remain on the index. (The float adjustments remove any large ownership blocks of 10 per cent or more from the calculation.) According to Mr. Cooper's data, CanWest's market capitalization at the end of August represented just 0.021 per cent of the total index.
As of yesterday's close, CanWest made up just 0.019 per cent of the index, making it the fourth-smallest stock on the 251-stock index.
CanWest's stock has recovered some lost ground in recent weeks, spurred by some much-needed asset sales and talk that Leonard Asper, CanWest's chief executive officer who heads up the founding and controlling Asper family, is considering taking the company private with the help of major shareholder Fairfax Financial Holdings Ltd.
Still, the stock is almost 20 per cent below its price at the end of May, the time for S&P's previous quarterly review of index membership.
Mr. Cooper had predicted at that time, too, that CanWest would be dropped from the index, but he was proven wrong. He said CanWest's market capitalization at the end of May was much closer to the 0.025-per-cent requirement than it is now, and some minor differences in calculations resulted in CanWest getting a reprieve.
"It has a much higher hurdle to climb this time," he said.
© Globe and Mail
With index provider Standard & Poor's due to announce its quarterly revisions to the S&P/TSX composite index in the next week or so, CanWest's market capitalization as of the end of August appears below the criterion for continued inclusion in the index, according to UBS Securities Canada Inc. strategist Garry Cooper. If his calculations hold true, CanWest would disappear from the closely watched index as of the end of trading on Sept. 19.
Exclusion from the key index would be another dose of bad news for the stock, which has slumped 63 per cent so far this year, as the company struggles with a weakening outlook for advertising sales and its onerous $3.7-billion debt load. That's because many fund managers, particularly outside of Canada, are barred by the terms of their funds from holding stocks that aren't members of major stock indexes such as the S&P/TSX composite.
CanWest's common shares slid 5.6 per cent on the Toronto Stock Exchange yesterday, as word of Mr. Cooper's analysis filtered through the market.
Under S&P's methodology for the S&P/TSX composite, component stocks must maintain a "float-adjusted" market capitalization of at least 0.025 per cent of the index's total capitalization in order to remain on the index. (The float adjustments remove any large ownership blocks of 10 per cent or more from the calculation.) According to Mr. Cooper's data, CanWest's market capitalization at the end of August represented just 0.021 per cent of the total index.
As of yesterday's close, CanWest made up just 0.019 per cent of the index, making it the fourth-smallest stock on the 251-stock index.
CanWest's stock has recovered some lost ground in recent weeks, spurred by some much-needed asset sales and talk that Leonard Asper, CanWest's chief executive officer who heads up the founding and controlling Asper family, is considering taking the company private with the help of major shareholder Fairfax Financial Holdings Ltd.
Still, the stock is almost 20 per cent below its price at the end of May, the time for S&P's previous quarterly review of index membership.
Mr. Cooper had predicted at that time, too, that CanWest would be dropped from the index, but he was proven wrong. He said CanWest's market capitalization at the end of May was much closer to the 0.025-per-cent requirement than it is now, and some minor differences in calculations resulted in CanWest getting a reprieve.
"It has a much higher hurdle to climb this time," he said.
© Globe and Mail
