Index Change Roundup: Upcoming Spins To Have Little Effect On S&P 500

There are a number of spinoffs scheduled to be completed at the end of this month (October) or in early November and naturally, there are a few scheduled changes to the S&P indices as a result. Here is a summary of the changes which will occur over the next week or so:

  1. HCP Inc (HCP) is spinning off Quality Care Properties (QCP-WI), a skilled nursing and assisted living facility focused REIT. Post-spin, the new company will be added to the S&P MidCap 400 Index, replacing apparel company Guess? (GES), which will be added to the S&P SmallCap 600 Index. Harte-Hanks Inc (HHS) will be dropped from the SmallCap Index as a result of the game of musical chairs. HCP will remain in the S&P 500 index.
  2. YUM Brands! (YUM) is finally spinning off its Chinese operations, YUM China, at the end of the month. YUM Brands will remain in the S&P 500, but the new company is not eligible to join the S&P 500 Index because it is domiciled in China. Interesting.
  3. Alcoa (AA) is undergoing a transformation by splitting its upstream and downstream operations. The current Alcoa parent company will change its name to Arconic post-spin and change its ticker to ARNC (now ARNC-WI). Arconic will remain in the S&P 500, but will now be classified within the Aerospace & Defense sub-industry, more properly representing its new focus. The ‘new’ Alcoa spinco will not be added to the S&P Composite 1500 at this time, but lets see what happens during the next commodity price boom.
  4. Johnson Controls (JCI) completed its merger with Tyco last month and is now set to distribute its seating business, Adient plc (ADNT-WI), to shareholders on October 31st. While the new company is based in a country with a more favorable tax regime, don’t forget that this particular spinoff will be taxable. Johnson Controls will remain in the S&P 500, but will have its sub-industry classification changed to building products to better describe its post-merger and post-spin operations. Adient plc will not be added to the S&P Composite 1500.

As we often note, investors watch index changes related to spinoffs for potential forced selling and attractive entry prices. There are quite a number of S&P 500 Index companies with spinoffs this month whose spincos will not be added to the ‘big boy’ index (or in some cases, any S&P Index at all!) so there might be a few worth watching if interested.

Disclosure: Author holds no position in any stock mentioned.