A Week Of Spins Means Index Changes: Washington Prime Group, Civeo and Now Inc to Join S&P MidCap 400

Last week featured a full line up of spinoffs with Simon Property Group (SPG) spinning off the Washington Prime Group (WPG) on Wednesday, May 28, and National Oilwell Varco (NOV) and Oil States International (OIS) spinning off NOW Inc (DNOW) and Civeo (CVEO) respectively on Friday, May 30. The new companies are all significant enough to force a reshuffle of some of S&P’s indexes.  All three parent companies remain in their indexes, Simon Property Group and National Oilwell Varco in the S&P 100 and S&P 500 indexes, and Oil States in the S&P MidCap 400.

Joining Oil States in the S&P MidCap 400 will be all three new firms, Washington Prime, Now Inc, and Civeo. The three new companies will force UTi Worldwide (UTIW), General Cable Corp (BGC), and Matthews International (MATW) into the S&P SmallCap 600.  Finally, ArQule (ARQL), PCTEL (PCTI) and Sigma Designs (SIGM) will leave the S&P SmallCap 600.

In general, investors monitor index changes as possible catalysts for price changes. This is especially true with spinoffs, where holders of the parent company automatically receive shares in the spinco. Rule based investors such as ETFs and dedicated index or sector funds could be forced to indiscriminately sell their shares in the spinco regardless of quality. Additionally, odd distribution ratios could leave holders with small share counts in a company they don’t really want to own. Given the popularity of the S&P 500, it is always worth noting whenever one of their spinoffs enters a new index.

Disclosure: The author holds no position in any stock mentioned.